12 January 2012
China will capture about 40 percent of the total increase in world
stocks because of the government’s decision to rebuild reserves.
China’s state reserve has purchased nearly 12 million bales of
domestic cotton and has also purchased several million bales of
foreign cotton. China’s government has announced its intention
to support farm prices by buying unlimited quantities of domestic
cotton at a target price. However, it is unclear to what extent it
intends to release cotton from the reserve later this season or
supplement domestic supplies by allowing additional imports.
Much of the increase in world stocks outside of China will be held by exporters, as most importers, other than China, are seeking to minimize stocks in light of sluggish demand and little perceived risk of higher prices.
With world supply marginally lower, global consumption is reduced, resulting in higher ending stocks. Trade is largely unchanged. U.S. production is slightly lower and exports reduced by 300,000 bales. The season average price is unchanged.
The U.S spot price and the A-Index have recovered slightly after the year-end holidays. However, trading volume remains very low.
Trade Changes 2011/12
United States is lowered 300,000 bales to 11.0 million on slightly
smaller crop and strong competition from foreign exports.
Brazil is increased 100,000 bales to 3.9 million on recent higher
China is increased by 500,000 bales to 16.0 million on continued
government stock building.
Thailand is decreased by 225,000 bales to 1.4 million as domestic
use falls sharply.
Pakistan is lowered by 100,000 bales to 1.3 million on a larger
Indonesia is lowered by 100,000 bales to 1.9 million on sluggish
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