China Cotton Monthly Review - August, 2014

Source:China Cotton Association  Date: 26/September/2014

By the end of August, seed cotton buying started sporadically around the country. In 2013/14 season which closed on 31st August, 2014, the reduced cotton production and weak demand handed market dominance to reserve cotton. During this time, textile mills consumed mainly reserve or import cotton, although the transaction of both declined compared with last season. Domestic cotton price was little changed during reserve cotton purchase and decreased after the closure of reserve sell and launch of Xinjiang cotton target price reform trial. Late of September, the implementation plan of Xinjiang municipality and Xinjiang Production and Construction Corps (PCC) was announced, the national cotton teleconference was held to clarify the macro policy for cotton.
The cotton acreage and production in 2013/14 declined. According to CCA survey, domestic cotton production is projected to be 7 million tons, 9.4% down Y/Y; import volume decreased, though around 3 million tons for the season, 31.7% down Y/Y; the reserve cotton purchase totaled 6.31 million tons, 6.58 million tons delivered to warehouses, around 94% of annual yield; to meet the textile demand, more than 13 million tons reserve cotton was offered for sell, and 2.65 million tons was sold finally.
During the season, cotton textile companies confronted challenges from weak export demand, appreciation of RMB, increased labor cost and reduced competitiveness; therefore, their cotton demand continued to be weak. According to National Bureau of Statistics, China produced yarn of 34.39 million tons during the 2013 season, 8.2% up Y/Y; according to Customs, the textile and apparel export valued 294.4 billion USD, 6.7% up Y/Y; cotton yarn import was 2.03 million tons, 4.2% up Y/Y, 44% slower than last season’s increase.
Supported by reserve purchase policy, domestic lint spot price moved around 19,000 Yuan/ton; when the reserve cotton purchase closed, the price fell to less than 17,000 Yuan/ton by the end of August. Index 3128B has annual average price of 18,625 Yuan/ton. The domestic cotton futures of Zhengzhou fell largely, the major contract fell to less than 14,000 Yuan/ton.
Cotton production continued to decrease in the new season. According to CCA survey, national cotton acreage is 63.4 million mu (4.23 million hectares), 9.4% less Y/Y, the largest decrease was seen in Inland, and little change in Xinjiang. By the end of August, CCA predicts national cotton production would be 6.71 million tons. Affected by the low temperature and rains since September, cotton growth and harvest would be postponed.
 

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