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Chinese cotton imports send prices surging

After years of stockpiling cotton, China is re-emerging as a major consumer of US cotton. This shift together with poor growing conditions in Texas has sent prices surging to a six-year high. The world’s most populous nation has purchased futures contracts covering more than 3,61,000 bales of US cotton for 2019-20. That is enough to make 400 million T-shirts. China has never booked that much cotton that far in advance at this time of the year, in data going back to 1998.

China is the biggest taker of forward sales. China’s return to global cotton markets is likely to mean a period of higher prices for a fiber used in most apparel, textiles and upholstery. It is also a boon to US producers who have long labored under a market whose prices investors perceived to be capped by China’s cotton stores, which for years have accounted for more than half of all global stocks.

The shift has revived interest in markets that were until recently seen as being overshadowed by Chinese policy. Open interest has reached all-time highs for this time of the year. China intends to raise cotton import volumes, a move that could increase Chinese purchases of American fiber.

 
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