In 2011, China began stockpiling what has become 11 million metric tons of cotton, or 10 billion pairs of jeans. The program began in March of 2011 as an attempt improve the livelihoods of Chinese farmers by setting a floor prices. Unfortunately, cotton prices fell leaving China with 60% of the world’s cotton stockpiles. However, cotton does not keep forever. An auction of the stockpile is scheduled within the coming months.
We spoke with Lucy Craymer of the Wall Street Journal in Hong Kong about how the sale will effect the global market for cotton.
Craymer on the market implications of China’s cotton sell-off:
It’s important to note that this cotton isn’t probably going to end up on the global market. However, China makes up about 30 percent of global cotton consumption. So if Chinese producers are using this cotton rather than cotton from elsewhere, it means there just isn’t demand there. We’ve already seen demand for cotton from China drop substantially. We’re already starting to see that cotton is trending down about 8 percent this year. It’s going to have a huge impact as we go forward.
On China’s future plans to protect its farmers:
Stockpiling is something that happens not just to make money, but because you are trying to help farmers out there who are suffering from low prices. It’s interesting that China pulled the policy in 2014, it’s looking at reforming its agriculture sector and trying to bring it further in line with the global markets.