China’s State Reserve Activity Dwarfs Other Traders

China’s State Reserve buying and selling activity will again surpass the world’s largest importers and exporters. Now in the third year of its price support program, the State Reserve has acquired massive stocks. To limit the growth, the government has been selling into the domestic market.

However, the State Reserve also continues to buy from both the domestic and foreign markets. In fact, in each of the previous two years, reserve purchases of foreign cotton are estimated to have been about 3 million bales, making it one of the world’s largest buyers.

The State Reserve has also become one of the world’s largest sellers, with sales exceeding U.S. exports.

With the need to rotate its massive inventory, and a stated objective of reducing the level of stocks, the State Reserve is likely to retain its dominant position in the market for several years.

Overview

The global outlook is largely unchanged with production and ending stocks up slightly, primarily in China. The U.S. production and exports were raised slightly. The forecast for the average price received by U.S. farmers is raised 0.5 cents per pound to 74.5 cents.

Prices

The U.S. spot price and the A-Index have continued to recover from the decline seen in October and November.

2013/14 TRADE OUTLOOK

Major Exporters:

• The United States is raised 100,000 bales to 10.5 million on larger production.

• Pakistan is up 100,000 bales to 500,000 on strong early season shipments.

Major Importers:

• Mexico is down 100,000 bales to 1.1 million as use slows