Weekly Report: Reserve Cotton Release Commenced; Seed Cotton and Lint Selling Prices Declined

To meet textile demand, state reserve cotton release started from 28th November, 2013 and would close by 31st August, 2014, via China National Cotton Exchange (CNCE) to cotton textiles at price of 18,000 Yuan per ton for standard grade. The first batch would be 2011/12 seasonal cotton, that has already passed exit-warehouse inspection conducted by China Fibre Inspection Bureau(CFIB) under previous cotton quality system would be cleared based on old value difference, and the rest have to be tested under the new cotton quality system and cleared under new value difference. The simultaneous movement of reserve purchase and release increased risks on trade fraud, which shall be supervised from aspects of purchase qualification control, goods delivery, transportation, usage and cotton processing by parties concerned, measures were also taken on report and punishment mechanism.
On 28th/29th November, there were 26,760 ton of reserve cotton being offered for auction, and 54.82% was sold, at price of 18,264 Yuan per ton for standard grade. Textiles prefer import cotton and bought 5,858 ton of them, the transaction rate of which was 94.16%, and that of domestic cotton was 49.07%, for 20,904 ton. At the same time reserve cotton purchase continued, by 29th November, reserve purchase of 2013/14 season totaled 3,063,400 ton, comprising 1,411,000 ton of Xinjiang cotton, 677,010 ton of inland cotton and 975,390 ton from key enterprise.
Last week, 25th/29th November, influenced by reserve release the spot price for domestic lint declined. On 29th November, under new cotton quality system, CC Index 3128B settled at 19,603 Yuan per ton, 74 Yuan down over the week. Currently, the quality and quantity of new arrivals decreased. According to CCA cotton processing industry, average buying price for Xinjiang seed cotton equivalent of 3128 was 8.76 Yuan per kilo, 0.03 Yuan down over the week; inland price was 8.38 Yuan per kilo, 0.04 Yuan down over the week. Based on Xinjiang price of 8.47 Yuan per kilo for white cotton 3128 at average ginning outturn of 38%, average moisture regain rate of 8.6%, average trash content of 2% and cotton seed price of 2.21 Yuan per kilo, the calculation of seed cotton processing cost would reach 20,000 Yuan per ton, which was much higher than domestic spot price, and leaving ginners no way but reserve to sell. In this tough market situation, many ginners had to stop seed cotton purchase at relatively earlier time.
As for import cotton, by the weekend, FC Index settled at 88.85 cent/lb, 0.65 cent down over the week.