US traders concern over China building huge cotton stockpile

The U.S. cotton growers and traders are concern over China building huge stockpiles of its own domestically produced cotton as it continues to import more and more cotton these days.

According to Fred Gale, United States Department of Agriculture China analyst, at the Ag Outlook Forum, the stockpile was not a conspiracy to corner the cotton market, but an unintended consequence of the Chinese government raising prices in support of domestic growers. At the same time world prices have been falling, so Chinese mills imported cheaper cotton from the world and the government has had to stockpile a lot of the higher priced domestic production.

Due to which China could end up with half of the world’s supply of cotton this year as the stockpile continues growing.

In the past, in such situation China would subsidize exports of the surplus commodities, but these days that would violate WTO rules. China will have to cut its acreage by 10 percent this spring.

However, it remains a puzzle for everybody as to how China is going to draw that stock down