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China's state reserve sold its smallest volume of cotton since 2018, and virtually every bale offered found a buyer. China cotton reserve sales and additional import quotas both bring cotton to market, but they draw on different supplies and cannot be added together as one pool of available cotton. A reserve sale releases cotton already sitting in Chinese storage and pressures domestic prices, whereas an import quota opens the door to foreign cotton and moves international prices. For anyone shipping cotton into China, that distinction decides which market feels the pressure.
Raphael Bulascoschi, StoneX Brazil Market Intelligence Analyst, tracks cotton, corn, and soybean markets from Campinas for commercial agricultural clients across South America and contributes to StoneX's quarterly commodity outlooks. His work analyzes how agricultural production and policy shape domestic and global commodity markets, supporting the risk management decisions of the clients he covers.
"China manages this cotton market through different instruments. It can buy cotton for the reserve, sell part of its stocks to spinning mills, or even authorize additional import quotas." Each of those tools lands on a different part of the supply chain, and Bulascoschi explains that "these decisions affect supply in different ways". Specifically, a China state reserve sale returns cotton already in storage to domestic spinning mills and weighs on Chinese domestic prices, whereas an additional import quota lets foreign cotton into the country. Because China is the world's biggest cotton consumer, a China import quota decision carries well beyond its borders, with a major impact on international cotton prices.
China's cotton reserve sales and import quotas cannot be combined into a single supply figure, because the two volumes reach the market through separate channels. A reserve sale moves stocks that China already holds, whereas a quota opens the door for foreign cotton to come in. According to Bulascoschi, "these volumes should not be added together as if they represented a supply that is actually available." As a result, a headline total of China's reserve sales plus quota volume can overstate how much cotton is truly on offer to Chinese mills at any given point.
China's state reserve sold roughly two thirds less cotton than the average of the 2018 to 2023 sale seasons, and about 81% of the volume was imported cotton, mainly from the U.S. and Brazil. The composition of the China reserve sale is characterized by an operation to supply mills during the off season ahead of the new domestic crop, combined with a rotation of older imported stock. A near-complete sell-through confirms demand for the cotton offered under the program's conditions, yet it cannot measure how much remains in China's reserve. Bulascoschi notes that "this does not mean the reserve is running out. The Chinese government does not disclose its current stock levels."
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Raphael Bulascoschi, StoneX Brazil Market Intelligence Analyst
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China's state reserve sold its smallest cotton volume since 2018, and nearly all of it found buyers. Reserve sales and import quotas move different markets, so adding them together misreads how much cotton China actually has on offer.
October 20 – Stock futures are pointing to a lower open to start the day, with the tech sector bracing for earnings from SpaceX and Netflix after today’s close, followed by Meta, Tesla, Texas Instruments, and IBM tomorrow. Eye-popping AI spending will be in focus, particularly as financing costs rise, with investors needing to see corresponding revenue growth to justify additional spending. The VIX is elevated slightly, hovering near 18.7 at the time of writing. The dollar is modestly lower to start the day, off roughly 0.2% to trade near 101.75. Treasury yields are starting the day mixed, with 2-year yields slightly higher to trade near 4.765%, while long-term yields are slightly lower, with the 10-year near 5.105% and 30-year just below 5.43%. Crude oil has carved out fresh highs this morning, with nearby WTI breaking above $100 for the first time in a month earlier in the session but now hanging near $99.70, while nearby Brent posted a five-month high near $112 but now trades near $110.30 at the time of writing. The ags are looking at a mostly higher start, with the grains and oilseeds looking for some turnaround Tuesday action.
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