China, kicks off the second-year of buying for its cotton stockpile, continuing its drive to protect local farmers and stabilise domestic production. Beijing bought 3.13 million tonnes of cotton in the last crop year, helping to artificially prop up local prices, which in turn made imports surge as textile mills sought cheaper overseas supplies.
The National Development and Reform Commission (NDRC) said on Monday that it would start buying crops harvested in 2012 for a period of nearly seven months, the same duration as last year, though it did not set a target for purchase volume. The purchase price for newly harvested standard cotton was set earlier in the year at 20,400 yuan ($3,200) per tonne. The front month contract price stood at 18,700 yuan on the Zhengzhou Futures Exchange on Monday.
The impact of stockpiling on imports this time around will largely depend on whether the government issues additional ad-hoc import quotas, with mills pushing for more of these as prices abroad have been as much as 40 percent lower than domestically. China in August issued an additional 400,000 tonnes of cotton import quotas, sources told Reuters at the time, bringing the total for the year to about 2.8 million tonnes. In a bid to help mills, the government has also started selling cotton reserves from its 2011 harvest at 18,500 yuan per tonne. It sold 146,216 tonnes of the crop in the first week of auction at prices between 17,780-19,410 yuan, according to a Reuters calculation based on data announced by the China Cotton Association.
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