China imported 56,000 tonnes of cotton in February, down 65% year-on-year. Demand from China is slumping due to sluggish economic growth and increased competition from polyester. In fact China is expected to be overtaken by Bangladesh as the world’s top cotton importer in 2015-16. The US Department of Agriculture has forecast Chinese cotton demand, in the year to July 2016 at just 1.01 Mt, the lowest imports in twelve years.
Cotton futures prices tend to peak in March before trending down through the summer. However this year cotton prices are already down 8% at just over 58 cents per lb. Prices have fallen on concerns that China will release cotton from its stockpile (thought to be in the region of 11 Mt, equivalent to ~60% of global stocks) on to the market. An announcement is thought to be due by the end of March, with details like the price and the size of the sell still unknown. Cotton prices have also declined due to the fall in crude prices (energy accounts for around 40% of the cost of producing cotton and competes with polyester in textiles).