More Ink for China's Cotton Market

China’s need for cotton is getting a tremendous amount of ink recently. Once it makes the front page of the WSJ or FT, you know it’s not a secret anymore. However, one of the biggest discrepancies in the information offered is the amount of imports China is expected to swallow in the 2009/2010 season. The USDA and the ICAC have projected total imports for China to be just over 2 mmt, whereas the National Cotton Market and Monitoring System (NCMMS), a subsidiary of the China National Cotton Information Center (CNCIC) as well as the China National Cotton Reserves Corporation (CNCRC), has estimated imports to be around 2.83 mmt.

This discrepancy deserves special mention due to the status of the NCMMS. The NCMMS is an information monitoring, publishing and early warning system approved by the government. This means the NCMMS is a recognized on-the-ground body assigned the task of determining intended cotton acreage, planted cotton acreage, harvested cotton acreage and total cotton output. While other government bodies offer their respective estimates and the market trades the sum, the smart money is following the NCMMS. They have 10 regional offices located in the cotton producing and consuming provinces. In addition, they have more than 200 monitoring stations in the same provinces observing the cotton crop and working directly with textile mills. Hence, they are well positioned to know exactly what’s going on in the greater cotton market in China. More importantly, the government listens to what they have to say and I would suspect makes some key decisions (perhaps the amount of import quota to be released) based on their information.  

As a result of the above, I am keen to see what type of adjustment, if any, may be forthcoming in the USDA’s May WASDE report.