Harvest prices fall during peak season, inventory increases sharply China Cotton Monthly Report (Oct. 2019)

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

In October, the national cotton picking processing entered the peak season, the weather conditions are suitable for picking, the yield forecast is consistent with the previous period. Textile markets have recovered, but demand has not improved significantly, Sino-US trade talks are progressing smoothly,and market confidence has slightly improved. The China Cotton Association forecasts that the country's total cotton production will be 5.91 million tons, down 3.35% year on year. Cotton consumption was 8.02 million tons, down 0.6% year on year and the same as the previous period. Both domestic and foreign cotton prices showed an upward trend. The increase in external cotton price has been greater than that in China, and the price gap has gradually increased. The harvest of new cotton was concentrated, and the processing progress was significantly accelerated. The purchase price dropped by nearly 20% year on year.

1.The nation's cotton harvest was accelerated

In October, the country's cotton harvest began on a large scale, picking up speed, the purchase price is lower. By the end of October, the national harvest rate was 88.88%. The delivery progress was 77.12%, and the average delivery price was 5.05 yuan/kg, down 21.48% year on year and 18.02% month-on-month. The pace of picking and selling in Xinjiang is faster than the same period last year. Mainland cotton picking progress has passed 90%, due to low cotton prices, the acquisition market is not active and other factors, the delivery is slower than the same period last year.

The total national cotton production is expected to be 59.057 million tons, a year-on-year decrease of 3.35%, which is the same as the previous period. In terms of regions, Xinjiang ’s output is 5.04 million tons, a 1.9% year-on-year decrease. The output was 467,000 tons, a year-on-year decrease of 9.84%.

 2.The acquisition entered a peak period, seed cotton prices fell year-on-year

In October, the national cotton purchase and processing entered a peak period. The average purchase price of 3128 seed cotton of 400 type cotton processing enterprises nationwide was 5.37 yuan / kg, a year-on-year decrease of 20.44%. The total amount of lint processed was about 1.55 million tons, a year-on-year decrease of 8.76%. By region, Xinjiang’s seed cotton purchase volume is lower than the same period of last year. Cotton farmers are reluctant to sell. Processing enterprises are afraid to open up the purchase in order to avoid sales pressure, or choose to sell lint on futures warrants. Although the purchase price of seed cotton in the mainland has shown an upward trend, it still has not reached the expectations of farmers, and the number of processing enterprises has been limited. The temperature dropped at the end of the month, and the seed cotton harvest was nearing completion.

 3.The market has picked up slightly and demand has not improved significantly

In October, the textile market recovered, but demand did not improve significantly, and raw material stocks and textile production were on the rise. As of October 31, cotton stocks in textile enterprises stood at 709,600 tons, up 8,200 tons from the end of last month and down 161,600 tons from a year earlier. Textile output rose 1.2% month-on-month and fell 3.3% year-on-year. Cloth output increased by 0.2% month-on-month and decreased by 4.1% year-on-year.

The domestic textile market is sluggish, and uncertain factors in external demand remain, and textile and apparel exports have declined. 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 year-on-year decrease of 7.88% and a decrease of 2.5% month-on-month; clothing USD 14.76 billion, a year-on-year decrease of 7.83% and a month-on-month decrease of 6.01%.

  4.Foreign cotton prices rose faster than domestic prices

In October, a new round of Sino-U.S. Trade negotiations progressed smoothly, and market confidence was slightly boosted. As the “Golden Nine and Silver Ten” traditional textile season came, the prices of cotton both domestic and foreign showed an upward trend. A large number of new cotton went on the market and there was ample supply of market resources. At the end of the month, the China Cotton Price Index (CC Index 3128B) was 12,971 yuan / ton, an increase of 363 yuan from the end of last month; the average monthly price was 12,96 yuan / ton, a month-on-month decrease of 239 yuan and a year-on-year decrease of 3,237 yuan.

At the end of the month, the Federal Reserve cut interest rates three times during the year, and the international cotton futures and spot prices fluctuated and rose. In the second half of the year, the spot cotton prices surpassed the domestic cotton prices, and the spread gradually increased. China's Foreign Imported Cotton Price Index, the FC Index M, was 75.27 cents per pound per month, up 4.02 cents per pound from the previous month. At the end of the month, it was 77 cents/lb, higher than the 4.69 cents /lb at the end of the previous month, and a 1% tariff reduction of RMB 13,418/ton was higher than the domestic spot of 447 yuan/ton in the same period, which was a reverse increase of 494 yuan/ton.

 5.A large number of new cotton on the market, a substantial increase in inventory

New cotton is listed in large numbers, companies enter the market cautiously, and commercial inventories have risen sharply month-on-month, but compared with last year, the year-on-year growth rate has continued to narrow. At the end of October, the total national cotton commercial inventory was about 3.24 million tons, an increase of 1.02 million tons from the previous month, which was higher than the 305,300 tons of the same period last year, and the year-on-year growth rate was slower than the previous month by 287,000 tons.

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