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Chinese Cotton Reserves Send Cotton Prices on an April Ride

Cotton prices fell for the first two weeks of April, then recovered, finishing the month almost where they started. The seven-market U.S. average spot price, which was $0.88 on March 28, fell to a four-week low of $0.83 on April 11, then steadily rose again, finishing the month pretty much where they started, and very close to the 12-month high of $0.89 reached in August.

During the first two weeks of the month, China’s decision to sell some of its huge reserves of cotton stocks at lower prices than previously expected resulted in an immediate glut of the fiber in the Chinese market, sending cotton prices down for the first time in over two years. Over the next two weeks, however, the price drop stimulated an opportunistic surge in demand from Chinese spinners, which sent prices up again.

China also reportedly allocated additional import quotas at favorable duty rates, which resulted, at least temporarily, in greater demand for US cotton. However, that spike in demand is expected to be short-lived, particularly if China is willing to release more reserves to help limit price increases that might hurt the local textile market. Demand for cotton has been tempered somewhat by a style shift toward synthetics in key markets like the U.S. and Europe, and relatively stable polyester prices.

Cotton prices remained stable in India but fell in Pakistan during the month.