Cotton: World Markets and Trade. World Prices Track China's Reserve Purchase Price.

摘要

As the worlds largest cotton producer, consumer, and importer, Chinas domestic policies not only impact its internal market, but also influence global markets and prices. In 2011/12, world stocks rose to record levels, and prices were in free-fall. China implemented a state reserve purchase program which stabilized domestic prices, drove up import demand, and thereby supported world prices at about $1.00/lb. For 2012/13, China announced an even higher support price. This helped maintain domestic production while sharply reducing consumption, which further added to world stocks. Rising world stocks would normally be expected to pressure world prices. However, prices have only declined slightly as Chinas support program absorbs surplus production and withholds it from the market, resulting in demand for imports. Although duty-paid import prices are now comparable to domestic cotton prices, future management of the reserve stocks creates uncertainty in the market and could change the current price relationship.