China's cotton import demand seen hurt by fears of lower quotas
China's demand for imported cotton is being squeezed by fears that Beijing will issue fewer import quotas this year, prompting mills to hold off on orders, traders say.
The world's top buyer of cotton will halt a three-year stockpiling programme in the 2014/15 season, replacing it with a subsidy for farmers in its biggest growing region of Xinjiang.
The new policy - officially confirmed this month, although few details have been decided - has stirred concerns that China will want to encourage consumption of its huge domestic stockpile of fibre at the expense of imports.
China's cotton reserves are expected to reach 12.7 million tonnes, equivalent to almost 60 percent of global stocks, after its third year of buying ends in the next few months.
"There is a fear that with so much in reserves, how will China issue more quota?" asked Gao Fang, secretary-general of industry body the China Cotton Association.
China has already issued part of the 894,000 tonnes of the 1 percent duty import quota it is obliged to offer under WTO commitments, but how much is not clear, with estimates ranging from a third of the figure to almost all.
But China typically also offers several thousand tonnes more under higher tariffs, calculated on the basis of a sliding formula. Many mills fear that with so much cotton in reserve, the government will cut back on quota releases.
"People are just using the WTO quota to cover nearby demand. They're not inclined to look forward due to lack of clear policy expectations," said one trade source, who asked not to be identified because of the sensitivity of the subject.
"Mills that have operations outside China are buying. The businesses with destination to China are holding out," said another trader.
Mills had stepped up purchases for December delivery to use up last year's quotas ahead of expiry, pushing total imports to 609,000 tonnes, or about 3.5 times November volumes of 173,000 tonnes. Abundant cheap Indian cotton also contributed several thousand tonnes of imports.
Indian cotton is expected to keep imports high in January, but arrivals will start to drop off from next month, said traders, only picking up later in the year if China releases additional quotas in March and April.
That will keep imports for this year well below the 4.4 million tonnes brought in during 2012/13, with estimates pegged from 2.4 million tonnes to 2.8 million tonnes.
Beijing may be keen to offer import quotas in return for purchases from its stocks, however, as it did last year. It gave out import quotas of about 124,000 tonnes to mills which bought cotton from the reserves during the 2012/13 marketing season.
- Adequate rhizobia populations help protect soybean yields
- In-season imagery helps farmers grow and protect healthy crops
- Ag markets proved rather volatile Wednesday afternoon
- Farm Bill enables record USDA investments in rural water systems
- Ag markets diverged Wednesday morning
- Do soybeans need N fertilizer?
- Commentary: Blame anti-GMO groups for deaths
- Julie Borlaug says biotech is necessary in fight against hunger
- What does “sustainable” food and agriculture really mean?
- Ohio bill to require certification to apply fertilizer
- FCC aims to offer high-speed internet to rural America
- Carbon-dioxide hurts nitrogen assimilation by plants