Once US cotton is out of the loan, its price is no longer linked to the AWP, but instead it will follow the law of supply and demand. When we look at the maturity dates of this loan cotton, as of March 1st we had around 5% maturing in June, 20% in July, 27% in August, 27% in September, 17% in October and 4% in November.
There have been rumors lately that buyers in the Far East were cognizant of this fact and that they were waiting for cheap forfeited cotton to hit the marketplace. Some analysts even believe that China will wait for these government auctions to fill the bulk of its import needs. While this may make sense in theory, we see a problem with the timing of such a transaction.
Apart from a small percentage that matures in June, the first big slice of cotton won't be forfeited until July, to which we need to add about a month until it hits the auction block. Therefore, forfeited cotton will not be available for shipment before the end of August or beginning of September, which means that it wouldn't arrive in China before new crop becomes available.