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China buys first cotton for reserves in five years as prices dip

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China’s state reserves bought 2,000 tonnes of cotton on Monday, its first purchase in five years, said the China Cotton Association on its website on Tuesday.

 

The cotton, all grown in major producing region Xinjiang, was sold at an average price of 13,259 yuan ($1,883.70) per tonne.

 

The reserves will carry out daily purchases until March 31, 2020, according to a notice on the association website on Sunday.

 

Domestic cotton prices hover at decade lows, hurt by a trade war between China, the world’s top producer and exporter of textiles, and its major buyer, the United States.

 

The purchases will replenish stocks but are too small in volume to support prices, said a China-based trader with an international trading house.

 

"The volume is really small, it won’t help at all," he said.

 

Cotton futures traded on the Zhengzhou Commodity Exchange fell 1.06% on Tuesday to 12,545 yuan per tonne.

 

China is planning to buy 500,000 tonnes in coming months, according to an earlier notice published by the Ministry of Finance.

 

Beijing used to buy up most of the country’s cotton for reserves to support farmers, but cancelled the policy in 2015 after its stocks had ballooned to more than 10m tonnes.

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