China Cotton Monthly Report – 27th September, 2012

For the season of 2011/12, China cotton production was 7.2 million ton, 7.5% up over last season. At the same time, the sluggish global economy impeded the increase of textile industry and reduced demand for cotton, the consumption of which decreased by more than 10% over last season to 9 million ton. The annual average of China Cotton Index was 19,116 Yuan per ton, down by 25.2% Y/Y. In order to protect growers?? interest and stabilize domestic cotton market, the government strengthened market regulation and purchased reserve cotton of 3.12 million ton at the price of 19,800 Yuan for type328. This historical reserve purchase prevented domestic cotton price slump, the decrease rate of which was 16% less than international one. At the same time, enlarged price difference home and abroad stimulated cotton import which was arranged by government to meet textile demand, and seasonal cotton import volume achieved historical high record of 5.44 million ton.

Cotton market encouraged textile market in a moderate way, the sales and prices of some textile goods recovered slightly, releasing pressure of finished product stocks. However, staggered global economy limited cotton demand, domestic cotton trade was inactive also largely due to reserve cotton release, large import cotton and alternative fiber purchase. National commercial cotton carryover stocks reduced continually month over month, though still very large compared with previous season. According to CCA survey, by the end of August, the total stock of national commercial cotton was 610,000 ton, 30% down over the month, and 23% up Y/Y.

According to Customs, in August, China textile and apparel export valued at .6 billion, 3% up over the month. Cotton yarn import was 150,000 ton, 110% more than last August; the export of cotton yarn was 30,000 ton, 19.6% more than last August. The export value of cotton cloth and clothes reduced over last August, and many textile companies struggle with bare operation. According to National Bureau of Statistics, the yarn production of August was 2.782 million ton, 1.9% up over the month, 15.3% up over last August. Price difference home and abroad narrows down, though still more than 3,000 Yuan per ton, and cotton import volume decreased for the fifth consecutive month, though still very high. The Customs statistics shows that China imported cotton of 306,000 ton in August, 24.6% down over the month, and 47.6% more than last August.

In August, cotton in most areas was opening bolls, and new seed cotton trade had started in some areas. In Xinjiang the abundant sunlight was positive for flowering and boll opening, while adversities of insufficient sunlight, lasting rain and drought in Yellow River and Yangtze regions would reduce cotton quantity and quality. From sowing to the end of August, weather optimum index of national cotton areas was appropriate, and disease and insect incurrence was light, therefore, average unit output nationally was estimated to increase slightly than last year. According to CCA survey to cotton farmers in 13 major planting regions, the output of Xinjiang cotton rose above the former estimate, while the decrease of inland rebalanced the national output, which was estimated to be 6.973 million ton, 4.2% down Y/Y, similar with July estimate.

On 18th Sep. CCA held national cotton situation analysis meeting, which joined by government departments related, industry organizations and company delegates to discuss cotton market situation of 2011/12 season and project on new season. The analysis for 2012/13 season was surplus market supply would be the case for a long time; therefore, market trend would be dominated by reserve policy.