Both Acreage and Yield Reduced Slightly; Textile Market Enters Off Season - Monthly Report (June, 2018)

Source:China Cotton Association  Date: 24/July/2018

Although unit yield of cotton increased slightly in favorable weather nationwide, the total acreage and yield decreased. According to survey by China Cotton Association (CCA), national cotton production in 2018 will be 5.95 million tons, 1.6% less Y/Y. In June, domestic cotton spot price declined largely after a surge, affected by policy factors such as restrictions on reserve cotton transaction and import quotas. The transaction rate and price of reserve auction both decreased. Textile market enters its off season; mill cotton usage percentage is stable with declined production and sales, commercial inventory reduced at slower pace. At the same time, international futures retreated also from high position with higher monthly average price over last month, as a result the price gap home and abroad narrowed mildly by the end of the month.

1. The general growth situation of cotton is positive, with slightly reduced acreage and production

In June, weather conditions are generally suitable for cotton growth. According to CCA’s survey, national cotton acreage is 7.03 million acres, a decrease of 4.43% over the same period last year, and the same with last month. The projection of national cotton production is 5.95 million tons, 1.6% less than that time of last year.

2. Reserve cotton auction transaction rate and price declined

Government announced that only textile mills are allowed to participate in reserve auction since 4th June. Affected by this policy, only 51.31% of reserve cotton in June was sold, 307,900 tons out of 600,100 tons offered, 29.82% less than May. The average monthly transaction price is 16,196 Yuan/ton in 3128 grade, 204 Yuan less than last month. 

3. Textile market in off season with declined production and sales

June is the traditional off season for textiles. According to CCA survey, the yarn production reduced by 3.12% over the month, 0.22% less than last June; cloth production reduce by 0.58% over the month, 1.25% less than the same time period last year. Yarn sales percentage is 85.11%, 6.11% less than last month. Domestic pure cotton yarn price rises over the month, import cotton yarn price also witnessed visible increase. Due to depreciation of RMB, import yarn settle price increased largely, by the end of June, import yarn spot price is 199 Yuan/ton higher than domestic yarn.

4. National commercial cotton inventory reduced at slower rate

Influenced by US & China trade friction, government announced the new policy of only mill users are allowed to buy reserve cotton since 4th June, which reduced transaction rate apparently, at the same time, announcing that 800,000 tons of sliding duty quotas will be granted. All these factors reduce the buying pace of mills in off season, and commercial inventory nationally is 2.25 million tons, 296,100 tons less than last month, a decrease of 11.6%, although 71.9% higher than the corresponding time last year. Xinjiang cotton stock is 1.15 million tons, 415,900 tons over the month, and 681,000 tons than last June; inland stock is 1.03 million tons, 179,100 tons over the month, and 253,000 tons Y/Y. the stock in bonded warehouses is 74,400 tons, a decrease of 59,300 tons over the month, and 11,000 tons Y/Y.

5. Decrease prices seen home and abroad, causing larger price gap over the month

Affected by policy and trade friction factors, domestic cotton spot price declined. By the end of the month, CC Index 3128B is 16,326 Yuan/ton, 285 Yuan less than the end of May, a decrease of 574 Yuan from the highest position of the month. The average monthly price is 16,466 Yuan/ton, 698 Yuan up over the month, and 449 Yuan more than last June.

International cotton price has higher average month price, though lower price than the end of May. FC Index M is 95.49 cent/lb. by the end of the month, 4.7 cent less than that of May. The price of cotton under 1% tariff is 15,109 Yuan/ton, 1,217 Yuan lower than domestic spot, the gap is 221 Yuan larger than the end of May. Average price is 99.41 cent/lb., 4.09 cent up over the month, and 14.23 cent higher than last June.

       



 

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China Cotton Index (CC Index)
2018-10-19
  • CCindex (3128B) : 15898 -15
  • CCindex (2227B) : 14889 -13
  • CCindex (2129B) : 16599 -26
Foreign Cotton Index (FC Index)
2018-10-19
  • FC index S: 92.95 0.00
  • FC index M: 89.01 0.00
  • FC index L: 87.23 0.00
Monthly Date
  • Cotton Import 1-2018 13.4(10 thousand ton)
  • Yarn Output 8-2018 277.2(10 thousand ton)
  • Textile Export 9-2018 266.1(100 million USD)
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