Cotton is set to trade between 70 cents and 80 cents a pound this year as China, the biggest buyer, boosts stockpiles and global inventories climb to an all-time high, according to Australia & New Zealand Banking Group Ltd.

World reserves may climb to a record 18 million metric tons in 2012-2013, Singapore-based analyst Victor Thianpiriya said in a report today. ChinaΆs inventories may total about 10 million tons, more than enough to supply its needs for a year, he said.

Cotton dropped 20 percent in the past 12 months on concern that rising output in China would cut imports and expand a global surplus. World stockpiles before this yearΆs harvest will jump 19 percent, the U.S. Department of Agriculture said Jan. 11. ChinaΆs reserves are rising as the government boosts purchases to support domestic prices and farm incomes.

“Global prices in 2013 hinge on ChinaΆs policies on how these reserves are managed and the release of Chinese import quotas,” Thianpiriya said. “With implied volatility currently low, this provides an attractive opportunity to use options to trade our bearish view on cotton.”

Cotton for March delivery fell 0.2 percent to 79.76 cents on ICE Futures U.S. in New York at 2 p.m. Singapore time. Prices rose to 80.20 cents yesterday, the highest since May 15.

Global consumption is forecast to remain 14 percent below the peak of 27 million tons in 2006-2007 and the stocks-to-use ratio is the highest on record, he said, citing USDA estimates. China will import 12.5 million bales of 480 pounds (218 kilograms) each in 2012-2013, down 49 percent from 24.53 million bales a year earlier, according to the USDA.