China to import more cotton
• Move is seen as another measure towards meeting demands of the US
China is planning to boost its imports of cotton by issuing additional import quotas to mills, says the China Cotton Association, a move seen by the market as another step towards meeting the demands of top exporter, the US.
The association, which lobbies the government on behalf of cotton farmers and processors, said on Monday the soon-to-bereleased additional quotas were one of the measures the government was taking to help ease recent market volatility.
China, once the world’s top cotton importer, has seen imports shrink from more than 5-million tonnes in 2011-12 to about 1-million tonnes in 2017, due to efforts to reduce state stockpiles. After several years of auctions to lower state stocks and with demand recovering, the market has become concerned about supplies. China’s domestic cotton futures have rallied nearly 18% since early April, fuelled in part by worries over crop damage from heavy rains, as well as by speculation.
Traders said China’s move, however, was more likely related to pressure from the US for higher imports of American farm goods.
“It’s definitely related to trade talks,” said a China-based trader with an international firm.
The US and China have threatened tit-for-tat tariffs on goods worth up to $150bn each, as US President Donald Trump has pushed Beijing to open its economy further and tackle the US’s trade deficit with China.
China has agreed to significantly increase purchases of US goods and services, though talks at the weekend yielded no public statement on agreements.
The US is China’s top overseas supplier. It shipped about 500,000 tonnes to China in 2017, making cotton the thirdmost valuable US agricultural export, after soya beans and hides and skins.
But China has restricted its imports since 2014, offering only the 894,000 tonnes in tariff-rate quotas it must allocate as part of its commitments to the World Trade Organisation.
Additional quotas with sliding tariff rates issued before 2014 were halted to get rid of huge state stocks. Total imports in 2017 were 1.16-million tonnes. It was not clear when the new quota would be released or how much would be offered, though the international firm’s trader said he expected at least 500,000 tonnes.
That would help buyers bring in large consignments of US cotton sitting in China’s bonded zones, he said, though it could also benefit purchases of fibre from growers such as India.
“There’s not too much US cotton available right now, but I don’t think senior officials consider this,” he said.
Despite the move to boost imports, the China Cotton Association said supplies were “basically sufficient”, and that “abnormal fluctuations in the market are influenced by speculation and other factors”.
China’s cotton output in 2018 is expected to remain stable, with weather disasters about the same as in previous years, the association said.
Bad weather came “relatively early” as well, reducing any effect on yield, it said.
Its comments came after concerns about hailstorms and heavy rain in top producing region Xinjiang drove prices higher.