China was due to start selling down its bloated state cotton reserves today, in an anticipated move that has already caused prices on global markets to unravel.
Chinese state cotton reserves stand at about 10m tonnes, or half the world total, after a three-year buying binge that supported international prices. The China National Cotton Reserve Corp is caught in a dilemma, as any attempt to cut its position is likely to pressure prices further and result in steep losses.
The auction, announced by China National Cotton Exchange yesterday, will be closely watched by markets for clues to the fate of the large cotton stocks that are baled up in its warehouses.
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