Stockpiling sale of China might lead to cheaper jeans
China planned a market-control strategy designed to support cotton farmers, with a sudden decline in export orders for China-made textiles and garments which in turn affect domestic cotton prices. Now they have too much
China began stockpiling of 11 million metric tons of cotton in 2011, or 10 billion pairs of jeans. The program began in March of 2011 as an attempt to improve the livelihoods of Chinese farmers by setting a floor prices. Unfortunately, cotton prices fell leaving China with 60 % of the world’s cotton stockpiles. However, cotton does not keep forever. An auction of the stockpile is scheduled within the coming months.
Lucy Craymer of the Wall Street Journal in Hong Kong gave the information of the sale. It is important to note that this cotton is not probably going to end up on the global market. However, China uses of 30 % of the global cotton consumption. If Chinese producers are using domestic cotton, rather than cotton from elsewhere, it means there just is no demand there. We have already seen demand for cotton from China drop substantially. We are already starting to see that cotton is trending down to about 8 % this year. It is going to have a huge impact as we go forward, Craymer comments.
Stockpiling is something that happens not just to make money, but because the aim is to try to help farmers out there who are suffering from low prices.