The International Cotton Advisory Committee (ICAC) has raised its forecast for 2014-15 global cotton ending stocks to a record 21.04 MMT, up from 20.04 in 2013-14 due to a sharp drop in projected demand, which will more than offset a reduction in the global crop, as well as expectations that China's inventories will surge due to the government stockpiling program. In its monthly outlook, ICAC says uncertainty on how China will handle its large reserves next season and the significant gap between polyester and cotton prices doesn't bode well for cotton consumption in China and countries that have heavily exported cotton to China in recent seasons.
Earlier this year, the Chinese government announced it would end its reserve policy, and test a target price policy in Xinjiang. In 2013-14, the government bought approximately 6.3 MMT of cotton, 42% of which came from Xinjiang, and sold about 930,000 MMT. "However, sales are expected to increase as Beijing Cotlook reports that the Chinese government will lower the starting auction price from 18,000 Yuan per ton to 17250 yuan and will allow spinners to purchase one bale of import reserve for every 3 bales purchased from Xinjiang warehouses. The (ICAC) Secretariat does not anticipate that reserve sales in 2013-14 will exceed 3.7 MMT, which is the volume of sales made in 2012-13. The Secretariat estimates that the Chinese government currently holds 12.8 MMT in the reserve. Total ending stocks for China (including private sector holdings) are expected to be 11.5 MMT in 2013-14, which account for 58% of world ending stocks."