China to Keep Building Cotton Reserves
July 12, 2012 According to one industry expert, China plans to continue building its already-massive cotton reserves while advising its farmers to focus more on food production.
Speaking on July 11 to a standing-room-only audience at the board of directors meeting of the Plains Cotton Growers, Wally Darneille, president and CEO of Lubbock, Texas-based Plains Cotton Cooperative Association (PCCA), explained the reasons behind the volatility of cotton prices and the need for the Chinese to stock cotton.
Among of the primary factors influencing price volatility are the uncertain export policy in India, Europe’s difficult financial situation, and battles for dominance among international commodity firms, according to Darneille.
U.S. producers can’t turn a profit with December cotton trading at about 70 cents/lb, he said, adding that they must produce at least three bales cotton per irrigated acre and keep costs low to make it through the year.
Finally, Darneille emphasized that global cotton stocks stocks are high and the expected cotton carryover will be largest ever, and will continue to grow. China holds about a third of that carryover in its reserves and despite its long-term concern about food security, the country will not abandon cotton –news that was warmly received by the West Texas growers in the audience.
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