Cotton – Sales from China State Reserve reach 10 million bales, says USDA

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By IAC Staff

Sales from China’s State Reserve remain strong with cumulative sales since the start of auctions on March 3 reaching over 10 million bales (2.2 million tons) this week, the U.S. Department of Agriculture (USDA) said.

The average sale price has been $0.966 per pound, 10 cents higher than the A-Index average of 86 cents during the same period, it said in its latest World Agriculture Supply and Demand Estimates (WASDE) report.

“About 138,000 bales (30,000 tons) have been offered for sale each business day with a base price calculated from the average of internal and world prices over the previous weeks,” the report said, adding that daily sales rates have varied widely with much of the fluctuation due to buyers’ expectations of changes in the base price.

It said sales have been split roughly equally between cotton from the 2012 and 2013 crops, while sales from the 2011 crop account for only 3 percent of the total.

Purchasing has been evenly split between spinners and traders, the report added.

It said demand has been very strong for cotton from Xinjiang with over 99 percent of its cotton offered being sold, amounting to just over 60 percent of total sales — in stark contrast to cotton from the eastern provinces which, overall, has represented less than 40 percent of the cotton sold.

“Furthermore, sales rates in the eastern provinces vary greatly. The determining factor for eastern sales appears to be the location of warehousing, while quality factors, such as length or colour grade, are less influential,” the report said.

The State Reserve recently announced that more Xinjiang cotton in the Reserve would be re-graded, a requirement for reserve sales. Related to this, the State Reserve is reported to have announced an extension of sales to September 29 from the initial August 31 end date.

“If sales through the end of September maintain the rate seen so far, total sales will be about 13.3 million bales (2.9 million tons). This would be greater than the roughly 2.7 million tons sold from the State Reserve during the 2016 tranche,” the report said.

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