CHINA, TARIFFS AND THE GLOBAL COTTON OUTLOOK
In the global cotton market, it is possible to delineate multi-year periods by their dominant supply and demand factors. For much of the past decade, the global supply and demand picture has been shaped by Chinese policies. In the three years that followed the 2010/11 price spike (2011/12-2014/15), a dominant feature was the high guaranteed price that the Chinese government offered their growers. These guarantees were enforced by the government taking physical possession of the cotton bought at mandated levels. During this time, the Chinese government purchased as much as 85-90% of its domestic crop. This resulted in the Chinese government building a massive stockpile of reserve supply. Given the volumes involved, these policies were clearly unsustainable, and the Chinese government reversed course beginning in 2015/16. Since then, the Chinese government has been working to reduce its inventories by limiting imports and selling from its reserves. This has been a defining characteristic of the global cotton market for the past three crop years.
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