China Cotton Monthly Review - April, 2014

At the beginning of April, the government authority announced the Xinjiang cotton target price of 19,800 Yuan/ton, and reduced reserve release cotton price to 17,250 Yuan/ton. According to survey by China Cotton Association(CCA), cotton growers in Xinjiang are generally satisfied with target price while the inland growers planting intentions declined further due to unclear government subsidy policy. The estimated cotton acreage nationwide is 4.08 million hectares, 12.6% down Y/Y. By the end of April, cotton sowing had completed nationally. Affected by reserve cotton release policy, the reserve sales increased in volume while the spot market price declined further. Based on cotton supply and demand and reserve trade, the seasonal cotton import and consumption volume are estimated to be lower than the earlier projection and the ending stock will increase.
Since Spring sowing, weather conditions in Yellow River region will be conducive for seed emergence; Gale, sand storm and precipitations in the Xinjiang cotton region and lasting rain in Yangtze region are bad for cotton growth there. By the end of April, the weather indexes in cotton regions nationwide are suitable, though not as good as the corresponding time last year. Nationwide the cotton planting acreage is 77.3% of the projection acreage, 0.4% up Y/Y.
After the adjustment of reserve cotton release, textile mills were more active at buying and bought 660,000 tons in April, around the total trade volume of the earlier three months. By the end of April, reserve release totaled 1.38 million tons. As the reserve release cotton took larger share, the spot cotton market is more sluggish, CC Index 3128B declined to 18,437 Yuan/ton at monthly average, more than 1,000 Yuan down than last month. As the spot trade is rare, commercial carryover cotton stock continued the decline to the lowest point for recent three years. According to survey of CCA, by the end of April, national commercial carryover stock estimates to be 225,000 tons.
In April, cotton import volume changed little over the month, though declined largely than last April, due to the reduced price difference between domestic and import cotton. For the month, 224,000 tons of cotton were imported, slightly higher than March, while just around half the volume of last April. The import of cotton yarn continued to increase due to price competitiveness.
In April, main indexes of textile industry continued to recover. For the month, 3.12 million tons of yarn was produced, 10% up Y/Y; export value of textile and apparel is 23.76 billion USD, 6.6% up Y/Y. Although the indexes showed positive signs, the textile outlook is still challenged by insufficient demand and tight money. The 115th Canton Fair closed by less buyers, reduced transaction values, and mostly middle or short orders.