Cost of importing cotton into China seen likely to rise under tariff schedule announced for 2014. Global cotton imports forecast down 16% from last season.
Cotton futures settled in the red for the first time in six sessions Tuesday after posting a new intraday high for the move.
Spot March closed down 43 points to 82.95 cents, in the lower third of its 108-point range from down 74 points at 82.64 to up 34 points at 83.72 cents. The high — same as the Oct. 22 close — was its highest intraday print since Oct. 23.
The May and July contracts both lost 47 points to close at 82.65 and 82.18 cents, respectively, and December dipped 39 points to 76.69 cents.
Volume totaled an estimated 12,300 lots, against 12,188 lots the previous session when spreads accounted for 3,254 lots or 27%. Options volume totaled 5,228 calls and 4,183 puts.
Traders have continued to ponder the potential impact on ChinaΆs cotton import prospects of a sliding-scale tariff schedule announced by the Ministry of Finance for calendar 2014.
The effect would seem likely to raise the cost of importing cotton, though demand uncertainties remain, some analysts said. Some viewed the announcement as confirming that new import quotas will be issued.
The benchmark price will be raised to 15,000 yuan per metric ton (equivalent to 110.98 cents per pound) from 14,000 yuan in 2013.
Above that price, a fixed per-ton duty of 570 yuan will be applied along with a 200 yuan port administration fee and a 13% value added tax.
For cotton priced below the benchmark, the duties will be calculated according to the modified mathematical sliding-scale formula.
China allows 894,000 tons (4.11 million 480-pound bales) of imports at a 1% duty under its World Trade Organization commitments. These are known as tariff-rate quotas (TRQ).
In addition, China typically has allowed imports at tariffs ranging between 5% and 40%. The timing and size of any new sliding-scale tariffs were unknown.
ChinaΆs cotton imports long have been expected to fall this marketing year as it sells more of its huge government stockpile.
But the quality of the offerings of government stocks could continue to play a significant role in import demand, some analysts agree.
The USDA earlier this month left its forecast of ChinaΆs 2013-14 marketing year imports at 11 million bales, down 46% from 20.33 million bales in 2012-13.
This is mainly responsible for the reduction in USDAΆs world cotton import forecast to 38.5 million bales, down 16% or 7.6 million bales from last season and the lowest in three years.
In recent years, global cotton trade has been supported by ChinaΆs import demand.
Futures open interest gained 2,158 lots Monday to 165,172, with MarchΆs up 1,430 lots and MayΆs up 560 lots to 31,105.
Certificated stocks declined 9,034 bales to 48,499. There were 12,833 bales decertified, 3,799 newly certified bales and none awaiting review.
World values as measured by the Cotlook A Index edged up five points Tuesday morning to 88.85 cents. The premium to MondayΆs March futures settlement narrowed 11 points to 5.47 cents.
