The Chinese government will buy cotton from farmers without a limit on volume when it launches a new stockpile plan this year, an industry website said on Friday. The cotton stockpile policy is the first such mechanism aimed at stabilising production, the government said earlier this year.
The purchase will kick off on September 1, with the price set at 19,800 yuan ($3,075) per tonne, the China Cotton Textile Association said in a statement published on its website, citing the National Development and Reform Commission. A detailed plan will be announced at the end of this month, it said.
Industry participants said cotton prices would be supported as there was no limit on volume to be purchased. "It helped to support cotton futures prices today, and cotton prices are likely to be capped within a certain period as the government has the reserves and can influence the market," said Guo Rongmin, China business manager with Cotlook Ltd, which publishes Cotton Outlook.
The benchmark January 2012 cotton futures contract traded on the Zhengzhou Commodity Exchange rose 0.6 percent to 21,625 yuan per tonne on Friday morning. Cotton was the only local agricultural product which has so far recovered from negative territory, after the tumble in the global commodities market.