Monthly Report: The Resumption of Textile Work Delayed, Decline in Home and Broad Cotton Prices China Cotton Monthly Report (Feb. 2020)

In February, affected by the outbreak of novel coronavirus, textile enterprises delayed the resumption of work, yarn, cloth output and textile and apparel exports decreased significantly, the cotton market sales basically stagnated. According to the CCA forecast, domestic cotton consumption fell to 7.82 million tons, down 3.1% year on year, 200,000 tons less than the previous period, imports fell to 1.88 million tons, down 8.3% year on year, 100,000 tons less than the previous period. Domestic and foreign cotton prices fell under pressure, and the decline in international cotton prices was greater than that in China. The difference between domestic and foreign cotton prices fluctuated greatly.

1.The Decline in Cotton Planting Intentions has Narrowed

At the end of February, the China Cotton Association conducted the third national cotton planting intention survey in 2020. The survey results showed that the national cotton planting intention area was 45,735,700 mu, a decrease of 5.03% year-on-year, and the decrease was 0.33% lower than the previous period.The area of cotton planting in Xinjiang is 3,536,100 mu, a decrease of 3.37% year-on-year, a decrease of 1.51% from the previous period; the Yangtze River Basin was affected by the epidemic, and the area of cotton planting is 44.491 million mu, a decrease of 9.93%, an increase of 4.6 The intended area of cotton planting in the Yellow River Basin was 5,274,700 mu, a year-on-year decrease of 10.99%, and the decrease was enlarged by 2.9% compared with the previous period.

2.The Purchase Price of Seed Cotton Fell

In February, the national cotton processing enterprises had a low rate of resumption of work, and the processing volume increased slowly, a significant decrease from last year. The purchase price of seed cotton fell year-on-year. As of February 29, the total processing volume of 400 cotton processing enterprises nationwide was about 5.515 million tons, a year-on-year decrease of 2.20%. The average purchase price of 3128 seed cotton was 5.47 Yuan/kg, a year-on-year decrease of 19.79%.

3.Both Domestic and Foreign Cotton Prices have Fallen

In February, textile companies resumed work slowly, the market supply and demand were not active, and domestic cotton prices fell. In the latter half of the year, the epidemic began to spread abroad, affecting the global commodity market, and international cotton prices fell rapidly. At the end of the month, China Cotton Price Index (CCIndex3128B) was 13,086 Yuan/ton, down 747 Yuan from the end of last month; the average monthly price was 13,418 Yuan/ton, a drop of 409 Yuan month-on-month and a decrease of 2082 Yuan year-on-year. International cotton prices have fallen sharply, and the difference between domestic and foreign cotton prices has widened from last month. The monthly index of China's imported cotton price index, FC Index M, was 77.90 cents per pound, down 2.19 cents from the previous month. It was 73.05 cents/lb at the end of the month, lower than the 7.86 cents/lb at the end of the previous month, and the 1% tariff was reduced by 12,406 Yuan/ton, which was lower than the domestic spot of 680 Yuan during the same period.

4.Significant Increase in Turnover Rate of Reserve Cotton

In February, the reserve cotton rotation plan was 196,000 tons, and the actual turnover was 108,800 tons, an increase of 90,600 tons from the previous month, and the turnover rate was 55.53%, which was 40.33% higher than the previous month. The average transaction price was 13,716 Yuan/ton, down 359 Yuan/ton from January.

5.Commercial Inventory Declines Shrink

In February, domestic cotton spot transactions basically stagnated, and some textile companies started construction in the latter part of the year. The cotton used for production was mainly based on digesting the inventory of previous years, and the market transactions were scarce. At the end of February, the total national cotton commercial inventory was approximately 4,972,600 tons, a decrease of 0.78% month-on-month and an increase of 8.84% year-on-year. Affected by the epidemic, the shipment volume of Xinjiang cotton dropped sharply. According to statistics, the shipment volume of Xinjiang cotton specialized warehouses out of Xinjiang was 126,800 tons, a decrease of 236,700 tons month-on-month, lower than 28,500 tons in the same period last year.

6.The Yarn, Cloth and Textile Exports Fell Sharply

Textile enterprises started late, and market purchases and sales have not fully recovered. The output of the sample textile enterprises in the whole month fell by a large margin. Among them, the yarn output fell by 71.2% month-on-month and 30.4% year-on-year. The actual start-up rate of enterprises is low, raw material demand is not strong, and transportation is limited, and their cotton inventories have fallen year-on-year and month-on-month. As of February 29, the cotton stocks of textile enterprises were 721,800 tons, a decrease of 47,700 tons from the end of last month, and a decrease of 87,500 tons.

According to Customs data, cumulative exports of textiles and apparel from January to February were US $ 29.835 billion, a year-on-year decrease of 19.96%. Of this total, textile yarns, fabrics, and products exported were US $ 13.737 billion, a year-on-year decrease of 19.90%. Clothing and clothing accessories exports were US $ 16.562 billion, a year-on-year decrease. 

China Cotton Supply and Demand Balance Sheet(Mar. 2020)       Million tons