China to Continue Building Cotton Reserves
July 17, 2012 China will keep building its cotton reserves and advise its farmers to produce more food, according to Wally Darneille, president and CEO of Lubbock-based Plains Cotton Cooperative Association.
Speaking recently in Lubbock to a full room audience at the Board of Directors meeting of the Plains Cotton Growers, Inc., Darneille explained reasons behind the cotton price volatility and the need for the Chinese to stock cotton.
An unstable export policy of India, the European financial situation and battles by international commodity firms for dominance are some factors that influence cotton volatility.
Opening his presentation with a slide showing a Chinese man feeding his baby, this July squeeze is hurting mills and affects cotton consumption, said Darneille. Commenting on cotton supply, he noted the world’s cotton carryover is at its largest ever and will grow. China is holding about one-third of carryover. According to Darneille, China’s long-term problem is food and they will not dump cotton.
Wallace said the Chinese government plans ahead for five years and will instruct farmers to grow food crops to feed its huge population. As a result of this Chinese situation, the High Plains of Texas will be the center of cotton universe.
Commenting on current cotton price situation, he said U.S. cotton producers cannot make money at December cotton trading at 70 cents. They have to produce at least 3 bales cotton per irrigated acre and keep costs low to make it through this year.
The reaction on this year’s cotton crop among the farmers who attended the meeting was mixed, and almost everyone in attendance needed rain.
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