China Cotton Monthly Review - October, 2014

In October, cotton harvest processed in full swing nationwide. Affected by the cold air in Xinjiang, the picking there delayed about half a month compared with the last season. Domestic cotton market stopped from earlier fall, thanks to the settled cotton macro policy, accumulated new arrivals and augmented seed cotton and lint purchase from gins and mills.
The weather during this month is conductive for cotton boll opening and picking, although the frost in Northern Xinjiang would reduce cotton yield and quality there; therefore China Cotton Association adjusted its national production estimate to 6.6 million tons, 60,000 tons lower than the earlier projection. In Xinjiang the machine picking processed fast and advanced the general process of seed cotton selling. The inland cotton picking came to the final phase with much slower pace due to the delayed subsidy policy announcement and market stalemate of seed cotton there. By 31st October, 77.8% of national seed cotton was picked, 9.7% slower Y/Y; 43.2% of projected production was sold to gins, 14.2% slower than the corresponding time last year.
As more new arrivals are available in the market and the big-bale ginners buy in large amount, the seed cotton market is quite active. In October, the average buying price of seed cotton nationally is 6.09 Yuan/kilo, 0.54 Yuan down over the month, and 3 Yuan less than last October. The national carryover commercial stock mainly is Xinjiang supervised cotton, with a few import or inland cotton. By the end of the month, carryover stock is 922,000 tons, 815,000 tons more than last month, and 524,000 tons more than last October. Domestic spot price fell largely and the monthly average price of CC Index 3128B is 14,848 Yuan/ton, 1,743 Yuan down over the month.
Import cotton volume continued to fall affected by sluggish textile demand. According to Customs, China imported cotton of 81,900 tons in October, 33% down over the month and 42% less than last October. The cotton yarn import is steady and fell by 0.7% over the month to 173,000 tons. As for textile production, the September output of yarn is 3.47 million tons, 1.8% up over the month, while September export of textile and apparel kept falling to 2.65 million tons, 7.1% down over the month.
On 4th November, the Ministries joint meeting on cotton target price reform trial was held and announced 9 inland provinces, namely Shandong, Hubei, Hunan, Hebei, Jiangsu, Anhui, Henan, Jiangxi and Gansu, as the inland cotton production subsidy implementation areas, and the 2014 subsidy standard will be 2,000 Yuan/ton. The subsidy granted from central finance to major inland cotton production provinces will be according to the announced cotton output by National Bureau of Statistics; whether the subsidy granted to specific growers according to acreage or yield, will leave to the discretion of different provinces. The subsidy will be delivered to growers by special account directly.