Cotton prices tumble on China concerns

LONDON: China is hoarding a record amount of cotton to aid farmers as global production exceeds demand for a fourth consecutive year, increasing the risk of a supply surge that would tip prices into a bear market.

The biggest producer and user will have 12.7 million tonne in inventory by July 31, 62% of the global total and enough to make about 71 billion t-shirts, the US Department of Agriculture estimates. The government may end its stockpiling program the following season, Macquarie says. Prices will drop 8.4% to 69.5 cents a pound in a year, according to the median of 12 analyst estimates compiled by Bloomberg.

While growers in the US and Brazil pared output as prices tumbled from a record $2.197 in 2011, Chinese farmers boosted production as the state absorbed excess crops.

The government bought supply equal to about 85% of domestic output last year and the nation will import 2 million tonne less this season, accounting for all the contraction in global shipments seen by the USDA.

Cheaper cotton boosted margins for Levi Strauss, Hanesbrands and other clothing companies.