Announcement of the State Reserve rotation announcement, domestic cotton prices rose steadily China Cotton Monthly Report (Nov. 2019)

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

At the end of November, the picking and selling of cotton across the country was basically over, and the progress was slightly slower than the same period last year. According to China Cotton Association, the national  cotton production was 5.90 million tons, unchanged from the previous period, and a year-on-year decrease of 3.35%. Cotton yarn sales were relatively smooth, the startup rate of spinning enterprises rose, production increased slightly, and cotton procurement was intensified. In the middle of the month, the country decided to rotate part of Xinjiang cotton, and the Sino-US trade negotiation progressed positively. Affected by this, the domestic cotton market was stable and good, and spot prices rose slightly. New cotton was listed on the market in large numbers, cotton companies' processing progress accelerated, and commercial inventories increased sharply at the end of the month, reaching an annual high level.
 1.National picking has basically ended, production is relatively stable
At the end of November, Xinjiang's picking and delivery have basically ended, the Yellow River Basin has ended its harvesting, and the Yangtze River Basin still has sporadic cotton unpicked. As of November 30, the national picking progress reached 99.15%; the sales progress was 92.21%; the average monthly sales price of seed cotton rose steadily to 5.46 yuan/ kg, an increase of 8.12% month-on-month, and a decrease of 13.2% year-on-year. The national cotton production remained unchanged from the previous forecast of 5.91 million tons, a year-on-year decrease of 3.35%. By region, Xinjiang’s cotton production is expected to be 5.04 million tons, a year-on-year decrease of 1.90%; the Yangtze River basin’s output is 360,500 tons, a year-on-year decrease of 11.34%; the Yellow River basin is expected to have a production of 467,000 tons, a 9.84% year-on-year decrease.
 2.New cotton processed more than last year
In November, the processing of new cotton accelerated, and the processing volume exceeded last year. As of November 30, the total processing capacity nationwide was about 3.51 million tons, an increase of 0.65% year-on-year. The purchase price is lower than last year. The average purchase price of 3128 seed cotton of 400 type cotton processing enterprises nationwide was 5.5yuan/kg, a year-on-year decrease of 15.90%. The acquisition volume of seed cotton in Xinjiang has gradually decreased, and the processing will end earlier than last year. The processing of ginners in the Mainland has also entered the middle and late stages, and the purchase volume of seed cotton has increased. However, because the price is lower than last year, cotton farmers have a bad mentality to sell.
 3.Textile companies increase purchases and production slightly increased 
In November, affected by the progress of the Sino-US trade negotiations, the textile market continued its warming trend in October in the first half of the month, and cotton purchases intensified, but the market turned weak in the second half of the month and the market recovered its weakness. Textile output increased slightly month-on-month, yarn production rose 0.7% month-on-month, and fell 2.1% year-on-year, and cloth production rose 0.4% month-on-month, and fell 3.5% year-on-year. Spinning companies' inventory of raw materials is generally low, enthusiasm for replenishment has increased, and the overall cotton inventory has risen slightly. As of November 30, the cotton inventory of textile enterprises was 723,200 tons, an increase of 13,600 tons from the end of last month, and a decrease of 143,300 tons.
According to Customs data: November’s textile and apparel exports were USD 22.07 billion, a decrease of 3.5% month-on-month and 4.3% year-on-year, of which textile exports were USD 9.95 billion, a month-on-month decrease of 3.5%, and garment exports were USD 12.12 billion, a month-on-month decrease of 4.7%, A year-on-year decrease of 4.9%. From January to November, the cumulative exports of textiles and apparel were USD 246.88 billion, a year-on-year decrease of 2.7%, of which textile exports were USD 109.26 billion, a slight increase of 0.1% year-on-year, and garment exports were USD 137.62 billion, a year-on-year decrease of 4.7%.
4.The price difference between domestic and foreign cotton fell
In November, Sino-US negotiations went smoothly, the market was relatively optimistic, the demand of textile companies improved, and the spot price of cotton rose steadily. At the end of the month, the China Cotton Price Index (CC Index 3128B) was 13,092 yuan/ton, up 121 yuan from the end of last month; the average monthly price was 13,060 yuan/ton, up 337 yuan month on month and down 2,502 yuan year on year.
International cotton prices fluctuated and fell, and the difference between domestic and foreign cotton prices fell from last month. China's Foreign imported cotton price index, the FC Index M, was 75.63 cents per pound, up 0.36 cents month on month. It was 76.04 cents/lb at the end of the month, lower than 0.96 cents/lb at the end of the previous month, and a 1% tariff reduction of RMB 13,256/ton was higher than the domestic spot of 164 yuan during the same period, which was 283 yuan smaller than the end of last month.
 5.Business inventories hit an annual high
In November, the new cotton market entered a peak, the end of the month cotton stock increased significantly, reached the highest point in the year. According to China Cotton Association, at the end of November, the total commercial cotton inventory in China was about 4.4967 million tons, an increase of 1.2724 million tons over the previous month and 233,700 tons over the same period last year.
6.The state has issued a notice on the rotation of cotton reserves
On November 14, the State Grain and Materials Reserve Bureau and the Ministry of Finance issued an announcement, in order to strengthen the management of the central reserve cotton, further optimize the reserve structure and improve the quality of the reserve, it was decided to rotate part of Xinjiang cotton. The rotation time is from December 2, 2019 to March 31, 2020, with a total amount of about 500,000 tons, and the central reserve cotton is purchased through open auctions in the national cotton trading market.

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