China will prepare an additional batch of 4,10,000 tons of cotton for its daily state auctions, lending weight to expectations that state sales would be extended to ease tight supplies. Chinese cotton futures fell more than two per cent by the end of Monday trading.

All cotton sold in state reserve auctions must first be reclassed to assess its quality after a period in storage before being put up for sale. That's a sign that they will extend sales by another month. The world is about to be inundated with cotton as farmers take advantage of high prices to produce more and China floods the market with excess supply from its strategic inventory.

Global output will climb 6.9 per cent in the season that starts August 1, helping push stockpiles outside of China to a record. American farmers, the biggest exporters, are forecast to have their biggest harvest in a decade, and crop increases are expected in Australia and top grower India.

Growers planted more acres after cotton futures jumped 12 per cent last year, when most other crops were mired in slumps. At the same, there are no signs that China’s sales of its state inventories are slowing down.