Cotton prices in China rose by the most in seven months as the world’s largest consumer set a reference price to subsidize farmers in Xinjiang region at a higher-than-expected level.
The commodity for January delivery on the Zhengzhou Commodity Exchange climbed as much as 3.6 percent to 16,400 yuan ($2,642) a metric ton, the biggest gain for a most-active contract since Aug. 26. Futures were at 16,140 yuan by 1:57 p.m. local time.
China set a cotton reference price in the biggest producer at 19,800 yuan a ton for the crop year of 2014, according to a statement on Gov.cn. The government will subsidize producers if market prices fall below the level, it said.
“The reference price was much higher than expectations,” Xi Jin, manager at China National Cotton Information Center, said by phone from Beijing, without giving a comparable figure. “That fueled a rally in the local market.”
The government has been stockpiling local crops at above-market prices to aid farmers, boosting government inventories. The country holds more than half the global cotton inventory, the U.S. Department of Agriculture estimates.
Futures for May delivery in New York were 0.5 percent higher at 91.10 cents per pound by 1:52 p.m. Beijing time. Prices tumbled 59 percent from a record $2.197 a pound in 2011.
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