(Reuters) - China is expected to sell about three million tonnes of cotton this year from state reserves of around 10 million tonnes, a top official at an international farm group said on Wednesday.
China's state reserves are more than 60 percent of global inventories after a stockpiling effort that pushed domestic prices 50 percent above world levels and drove imports to a record 5.13 million tonnes last year.
"We expect China stocks at the end of the season will be down to 7 million tonnes," Terry Townsend, executive director of the International Cotton Advisory Council (ICAC), told Reuters.
China state reserve sales could end cotton's run as the year's best-performing commodity, up more than a fifth so far on ICE Futures.
Cotton prices hit a one-year high of 93.93 cents a pound last week, but remain well below their record above $2.20 a pound hit in March 2011.
"I expect world cotton prices are going to come down and that will suggest that New York futures are also going to come down," added Townsend, who is in Singapore to attend an industry conference.
"Cotton needs to come down to around 70 or 80 cents a pound to be competitive with polyester."
Physical demand and tightening global supplies have underpinned the futures market, according to merchants, brokers and growers.
"China has been building reserves since August 2011 and right now their reserves are 10 million tonnes," Townsend told Reuters in an interview.
"From April, and right up to September, until their new crop comes in, they will be gradually selling part of that reserve," Townsend added.
He said the ICAC estimated this season's average price would be 87 cents on the organisation's Cotlook A-Index, which is compiled from the cheapest prices offered to mills and is closely correlated to New York cotton futures.
"The current price level is supported only by this reserve policy of China," Townsend told Reuters. "If the reserve did not exist, prices today would be around 60 or 70 cents a pound." (Reporting by Lewa Pardomuan and Naveen Thukral; Editing by Clarence Fernandez and Michael Urquhart)
