Early this week, cotton futures plummeted after China announced plans to cut the selling price of reserve bales, renewing worries about import demand in the world's top consumer and prompting waves of long liquidation. The most-active May cotton contract on ICE Futures US closed down 2.68 cents, or 2.9 per cent, at 90.63 cents a lb after dropping to an over two-week low of 89.84 cents a lb. Global equity markets also suffered a fall over concerns of the Ukraine crisis and slowing growth in China. 

Beijing plans to cut the sale price of cotton in its strategic reserves, bringing it more in line with world prices to speed up lackluster auctions and reduce the country's ballooning inventories. China's stocks have swelled to nearly 60 per cent of world stocks projected to hit a record 97 million bales by the end of July. Fiber withstood pressure from the news early in the session before reversing and falling almost 4 per cent as worries built over the demand impact of lower domestic prices and larger policy changes as China prepares to scrap its controversial stockpiling program. 

Beijing launched its stockpiling program in 2011, paying above global prices to support farmers, driving voracious demand for imports, and pegging a floor under the world market even as global output outstrips demand. Prices also faced technical pressure after inching to a session high of 93.75 cents a lb, matching but not breaching a seven-month high hit earlier this month. Technical support came in along key moving averages, and the front month settled just above its 20-day moving average of 90.18 cents a lb. 

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