National cotton production dropped, seed cotton prices lower than last year China Cotton Monthly Report (Sep. 2019)

Source:China Cotton Association  Date: 05/October/2019

In September, affected by the adverse weather in the early stage, Xinjiang's cotton picking and delivery progress was slower than last year; the mainland was not motivated to pick and sell cotton due to the low cotton prices. Processing enterprises entered the market cautiously, the overall purchase volume was not large, and the price of scales dropped sharply. According to the China Cotton Association, the national cotton production is expected to be 5.9 million tons, a decrease of 185,000 tons from the previous period, and a year-on-year decrease of 3.35%. Sino-U.S. Trade frictions have eased. At the same time, the textile industry has entered a traditional peak season, and corporate demand has relatively improved. Although domestic cotton prices have continued to decline. At the end of the month, the national cotton commercial inventory declined.

1. National cotton production declines

In September, Xinjiang's cotton seedlings grew slowly. In order to promote the growth of cotton seedlings, excessive use of fertilizers resulted in a decline in yield. The production dropped to 5.03 million tons, a year-on-year decrease of 1.9%.  The estimated production of the Yangtze basin is 365,500 tons, down 11.34% year-on-year. The Yellow River basin production is expected to 467,000 tons, down 9.84% year on year.  

2. The purchase and processing of new cotton began, and the price of seed cotton fell year-on-year.

In September, the acquisition and processing of new cotton began. The price was lower than in previous years. There was a certain gap between the purchase price and the expectations of cotton farmers. The enthusiasm of cotton farmers for sales was not high. It was 54,797 tons, a decrease of 39% year-on-year. The average purchase price of 3128 seed cotton of 400 type cotton processing companies was 5.80 yuan/kg, a year-on-year decrease of 17.5%,the mainland price is higher than Xinjiang.

3.Nearly one million tons of reserve cotton sold out

On September 30, 2019, the reserve cotton round ended, and this round began on May 5 for a total of 22 weeks. The cumulative roll out plan is 1.16 million tons, and the actual turnover is 996,200 tons, with a turnover rate of 85.71%. Among them, Xinjiang cotton traded 537,900 tons, with a transaction rate of 94.33%, and mainland cotton traded 458,300 tons, with a transaction rate of 77.41%.

4.The market recovered slightly and yarn production increased

In September, entering the traditional peak season of the textile industry,  the market recovered, and actual orders have improved from last month. According to the survey, by the end of September, yarn production rose 3.4% month-on-month and drop 2.6% year-on-year. The production of cloth increased by 2.7% month-on-month and decreased by 3.5% year-on-year. The inventory of finished products of spinning enterprises was 27.16 days, a decrease of 2.37 days from the previous month. Finished stock of grey cloth was 29.08 days, 2.08 days less than the previous month.

According to Customs data: textile and apparel exports in September were USD 24.52 billion, a year-on-year decrease of 7.85% and a month-on-month decrease of 4.64%. Textiles amounted to USD 9.765 billion, a decrease of 7.88% year-on-year, and a decrease of 2.5% year-on-year; clothing USD 14.755 billion, a decrease of 7.83% year-on-year, and a decrease of 6.01% year-on-year. From January to September, the cumulative export of textiles was USD 89.159 billion, a decrease of 0.1% year-on-year; the cumulative export of apparel was USD 112.795 billion, a year-on-year decrease of 4.7%.

5.Internal and external cotton prices tend to be consistent

In September, Sino-US trade frictions eased and industry confidence recovered. At the same time, the demand of textile companies has improved relatively. Although domestic cotton prices have continued to decline, the decline has been smaller. The international cotton market stopped falling and stabilized. At the end of the month, the spot prices of cotton at home and abroad tended to be consistent. At the end of the month, the China Cotton Price Index (CC Index 3128B) was 12,608 yuan / ton, down 377 yuan from the end of last month, and the decrease was narrowed by 705 yuan; the average monthly price was 12,962 yuan / ton, which was 572 yuan lower than the previous month, and dropped 3351 yuan year-on-year.

International cotton prices rose slightly, the domestic and foreign cotton spot prices approached at the end of the month. China's imported cotton price index, the FC Index M was 71.25 cents/pound per month, down 0.79 cents/pound from the previous month. It was 72.31 cents / lb at the end of the month, higher than 1.13 cents / lb at the end of the previous month, and a 1% tariff reduction of RMB 12,561 / ton was only lower than the domestic spot of 47 yuan / ton in the same period, which was 848 yuan / ton lower than the end of the previous month .

6.Commercial stocks continue to fall

In September, the market was expected to improve slightly, and China's cotton commercial inventory continued to decline at the end of the month. According to China Cotton Association: At the end of September, the total national cotton commercial inventory was about 2.2 million tons, a decrease of 317,400 tons from last month, and still a year-on-year increase of 537,600 tons, but this gap narrowed by 356,100 tons.

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