Despite ChinaΆs huge stocks, the gap between high domestic and lower world prices has attracted cotton imports, attache report says. Yarn imports during the first half of 2013 jumped 47%.
Cotton futures meandered within tight trading ranges on thin volume and settled with fractional gains Wednesday.
Benchmark December closed up four points to 82.75 cents, eight ticks off the low of a 68-point range from 83.35 to 82.67 cents. March edged up five points to close at 82.32 cents.
Volume slowed to an estimated 11,000 lots from 16,899 lots the previous session when spreads accounted for 4,682 lots or 28% and EFP for 59 lots. Options totaled 1,770 calls and 3,644 puts.
China issued through July an additional import tariff rate quota of 1.2 million metric tons (5.52 million 480-pound bales) subject to sliding duty based on total auctioned reserves of about 3.7 million tons (about 17 million bales), according to a U.S. agricultural attache report.
The estimate is linked to a 3:1 ratio whereby the government allocates a ton of import TRQ per 3 tons of cotton reserve purchased.
A new TRQ import allocation (over ChinaΆs World Trade Organization commitment) has been rumored but no official details have been released, the report said. (Rumors also have circulated of a possible resumption of auctions from the government stockpile and also have lacked confirmation.)
Despite ChinaΆs huge cotton stocks, the continuing gap between high domestic and lower world market prices has attracted imports to meet demand, the attache said.
The post raised its forecast of 2013-14 imports to 10.11 million bales from its previous projection of 9.19 million bales, below USDAΆs official August estimate of 11 million bales. Imports for 2012-13 are estimated at 19.75 million bales by the post and 20.33 million by USDA.
Conversely, yarn imports have continued to rise. With yarnΆs low price and no quota limit, ChinaΆs traders have increased yarn imports to meet mill demands for raw material.
Yarn imports in the first six months of 2013 reached 888,000 tons, up 47% from 606,000 tons in the corresponding period the previous year, and stood at 1.4 million tons in 2012, up 75% from 804,000 tons in 2011, the report said.
The post left its estimates of ChinaΆs production and consumption unchanged from previous reports at 32.15 million bales and 39.96 million bales, respectively, compared with USDAΆs August forecasts for a crop of 33 million bales and mill use of 36 million.
ChinaΆs National Development and Reform Commission, which has announced that the government support price for domestic cotton will be unchanged in 2013-14, has solicited suggestions for cotton policy reform.
The commission is reported working on a pilot reform project which may be implemented in Xinjiang next year. The program focus may include a “direct subsidy” but details remain under discussion, the report said.
Futures open interest fell for the 10th consecutive session Tuesday, with DecemberΆs down 3,026 lots to 125,289 and MarchΆs up 553 lots to 36,402. Certificated stocks declined 1,387 bales to 16,771 as 3,472 bales were decertified and 2,085 bales were newly certified.
World values as measured by the Cotlook A Index dropped 65 points Wednesday morning to 88.75 cents. The premium to TuesdayΆs December futures settlement widened 13 points to 6.04 cents.
