China said it bought 417,200 tonnes of domestic cotton for state reserves last week that has taken total purchases in 2013 to more than 3 million tonnes, about 10 percent lower than volumes bought by the same time last year due to quality considerations.
Stockpiling by the world's top cotton buyer, now in its third year, has hurt Chinese mills by pushing up domestic prices while benefiting overseas suppliers, whose prices are significantly cheaper. To address the mills' concerns, China has begun a new round of daily sales from its stockpile and last week sold 26,762 tonnes of old fibre, according to data from the China Cotton Information Center.
The state reserve purchases have been slower in the current season that started in September as ginners adjusted to higher quality standards and a delayed harvest in Xinjiang, China's top cotton growing region, led to tight supplies. The latest week's purchases were only about 54 percent of the targeted volume. Compared to the 3.06 million tonnes acquired in 2013, the stockpiler had bought 3.39 million tonnes of the fibre by the same time last year. Beijing's buying typically supports international prices, with China's stockpiles set to reach more than 11 million tonnes, or more than half of global stocks, by the end of the crop year in September 2014.
However, last week Beijing started selling off some of the older fibre in its stocks, offering fresh supplies to the domestic market and pressuring prices on ICE. The reserves sold 26,762 tonnes on November 28 and 29, the first two days of the new sales. China's stockpiling scheme aims to support local growers through high purchasing prices. The reserves have a fixed purchase price of 20,400 yuan ($3,300) per tonne, almost double the price of the December cotton contract on ICE.
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