* Chinese cotton restocking driving force for 2012/13
* ICE No. 2 cotton contract to stay world's contract

July 27 (Reuters) - China's policy of buying and stashing
large amounts of cotton in state reserves will dominate the
market in the 2012/13 marketing season getting started on Aug.
1, the chief executive of the world's biggest cotton trader and
merchant said on Friday.
Allenberg Cotton Co President and CEO Joe Nicosia told the
Ag Market network's annual radio program from New York that
"everything (in the cotton market) is dependent on the Chinese
reserve policy."
"China's cotton policy is supporting prices globally. As
long as China continues to build its reserves, the cotton market
will be protected from its surplus," he said. Allenberg, the
wholly owned unit of trading giant Louis Dreyfus, is
the world's biggest cotton merchant and trader.
The U.S. Agriculture Department forecast world cotton ending
stocks in 2012/13 (July/August) at 72.39 million (480-lb) bales,
down slightly from the record 74.51 million it forecast in its
June report. The USDA's next update is due on Aug. 10.
China's ending stocks are seen at 31.8 million bales and now
account for 44 percent of the world total. The "primary
beneficiary" of Beijing's cotton purchases have been the
American farmer, Nicosia explained.
Nicosia said a drive to put in place a new world cotton
contract to supplant or replace the No. 2 cotton contract by ICE
Futures U.S. will get underway.
But he poured cold water on its chances of replacing the
current cotton contract by ICE.
"I think the No. 2 (cotton contract) will still be the
flagship (for the cotton market)," he said. "I think it's going
to be difficult to get that (a new world cotton contract) to
work."
Critics of the current cotton contract feel it is too
restrictive because the only cotton that can be delivered is
U.S. cotton. They said the market needs a contract which would
have more delivery points to reflect the world-wide nature of
cotton cultivation and its market.
Exchange sources said the matter has been discussed, but
there was no sign yet of a decision over the issue.
Looking ahead to the 2013/14 season, Nicosia said surging
corn and soybean prices would lead to large-scale switching by
American farmers in 2013 to grains and away from cotton. Cotton
farmers in Brazil, a major producer of soybeans, would also be
prime candidates to get out of cotton.
USDA pegged U.S. cotton sowings in 2012 at 12.64 million
acres (5.1 million hectares), down from the 14.72 million sown
in 2011.
Nicosia said U.S. farmers may go back the level of plantings
in 2009, when only 9.15 million acres were sown, if grain prices
stay this high.