2019 state cotton reserves sales to commence from May 5, 2019

In order to optimize reserved cotton structure and ensure the quality, the National Food and Strategic Reserves Administration and the Ministry of Finance released the announcement about state cotton auction and reserve in 2019.

The state cotton auction will start from May 5 and last to September 30, 2019, with the total quantity of about 1.00 million tons. In principle, the daily auction volumes are about 10,000 tons. The base selling price will continue to be related with international cotton prices, and the calculation will be showed below.

Moreover, the announcement also states that the state cotton reserves policy may be implemented according to the actual state cotton auction and market supply and demand.

The base selling price is set at the average price of international cotton and domestic cotton, which will be adjusted every week.

Formula:
Base selling price (cotton type 3128B)=average price of prior week's domestic cotton prices*50%+average price of prior week's international cotton price*50%.
1. Domestic cotton price=(China Cotton Index+CNcotton)/2;
2. International cotton price=Cotlook A Index (converted to USD per ton)*exchange rate*(1+1%import duty)*(1+9%VAT)
3. The exchange rate is the benchmark exchange rate of the foreign currency against the RMB announced by the People's Bank of China, based on the customs taxation method and the third Wednesday of the previous month (if it is on public holiday, the fourth Wednesday is postponed).