India will sell cotton to local buyers from government stockpiles, joining China as the world's top two consumers try to cushion domestic textile mills against soaring costs. The sales by China and India, also the two leading producers, should ease tight supplies and help cool global prices that have soared 20 percent this year on strong demand - partly because of the Asian giants' hoarding.
China, the world's largest consumer, is expected to sell about 3 million tonnes of cotton this year from state reserves of around 10 million tonnes, Terry Townsend, executive director of international farm group ICAC, said on Wednesday. "We expect China stocks at the end of the season will be down to 7 million tonnes," Townsend told Reuters in an interview in Singapore.
In India, an official at the partly state-run National Agricultural Cooperative Marketing Federation said a decision was being taken on stock sales that should take place from April. Both India and China have bought domestic production to guarantee returns for their farmers, but the move appears to have backfired, squeezing profits for textile mills as prices have surged.
Domestic prices in China are 50 percent above world prices, while in India they are roughly on par, against a usual discount of around 5 to 7 cents per pound. China's stockpiling is expected to gobble up more than half the world's cotton surplus - even though it should be a record - by the end of the crop year in July, according to the US Department of Agriculture.
Investment from speculators on expectations of continued hefty purchases from China helped push US cotton futures to a one-year high of 93.93 cents a pound last week, but they remain well below their record above $2.20 a pound hit in March 2011. India will sell cotton from stocks of 2.5 million bales (425,000 tonnes) out of a crop expected to total 33 million bales in the year to September 30, 2013. Domestic mills normally use about 26 million to 27 million bales.
China could double volumes approved to nearly 1.7 million tonnes from April, according to trade sources, favouring mills that sell their textiles for export. India will also turn to imports, which could jump about two-thirds in 2012/13, according to the Confederation of Indian Textile Industries.