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China to Sell Stockpiled Cotton Next Month

The Chinese government is gearing up to reduce its massive cotton reserves.

Yin Jian, deputy director of China’s National Development and Reform Commission’s (NDRC) trade department, told The Wall Street Journal that a series of auctions will take place next month.

Cotton prices have declined 10 percent since the start of the year and the U.S. Department of Agriculture (USDA) has lowered both its global production and consumption forecasts for six months in a row. The latter is mostly China’s fault, as traders awaited news of a sale from the country’s 10 million ton stockpile.

The auctions are slated to start toward the end of April, but the amount and quality of cotton to be sold has not yet been announced, which means that its potential impact on global prices has yet to be determined.

Similar sales have had limited success. China previously attempted to sell a million tons of cotton from its reserves during last July and August, but only managed to move 63,413 tons because buyers said the asking price was too high. Likewise, daily auctions took place from January through July of 2013, but steep rates meant that mills only bought a quarter of what was up for grabs.

According to industry website, this time the NRDC wants to cut reserves by spotlighting the sale of imported cotton and said it will set prices in line with real-time market conditions.

Cotton prices ended Monday at nearly $0.58 per pound on the ICE Futures U.S. exchange, a market benchmark. The low for the year (around $0.56) was reached earlier in the month.