China Cotton Monthly Review - July 2013

By the end of July, the second round of reserve release of 2012/13 season closed by total transaction of 3.72 million ton, 70% of domestic cotton, which was less welcomed than import cotton due to quality reason. The market resource available was quite limited and reserve cotton remained the channel for textiles.
July is vital for the final yield of the crop, however, the weather was not very encouraging in most cotton areas with flood in the north and drought in the south, the general growth of cotton was slightly worse than corresponding time last year and a decrease in average output was the projection. According to CCA estimate, the output of cotton this year would be 6.78 million ton, 210,000 ton less than June’s forecast, 8.6% less than last July, although better weather in the future might improve the result.
reserve cotton release closed in July, textiles then worried about raw material purchase in the new season and bought 1.2 million ton of reserve cotton, doubled the figure of last month. While at the same time still sluggish textile sales discouraged the spot price. The average monthly price of CC Index328 was 19,260 Yuan per ton in July, 0.3% less over the month, and 6% up than last July. 
At the same time, import cotton volume increased. In July, China imported cotton of 340,000 ton, 25% up over the month, and high quality grade cotton was preferred, especially the Australian cotton.
Import and reserve transaction increased commercial carryover stocks. According to CCA, by the end of July, commercial cotton carryover stocks totaled 462,000 ton, 38.5% up over the month.
Affected by diversified elements, textile industry faced difficulty. According to Customs, the cumulative yarn production from January to July was 19,560,000 ton, 8.5% up Y/Y, the increase rate was 4.4% less than last month. For July, export of textiles and apparel increased, the export value of which for January to July was 154.9 billion USD, 12.7% up Y/Y, the increase rate was 13% up Y/Y.
Temporary reserve policy of 2013/14 season would be announced at the beginning of September with regulation details. Supported by this policy, the cotton price during the early period of the season would be stable.