Weekly Report - Sliding-scale Quota Rate Modified; Reserve Volume Increased

Last week, Central Agricultural Working Conference was held in Beijing, arranged agricultural and rural work at present and in the near future. 2013 tariff implementation plan was announced, continuing to apply sliding-scale quota at the modified rates besides the tariff-rated quota. According to CCA calculation, the sliding-scale quota rate would increase when the quote price of import cotton was between 50.6 and 101 USD/Ib. Affected by recent precipitation, inland reserve trade reduced moderately, while total reserve volume up to date approached nearly 5 million ton, reducing high grade cotton in the market. Domestic cotton futures price surpassed reserve price already, and both lint spot and seed cotton price continued to rise.

Since mid-December, the low temperature and precipitation impeded the cotton procurement, processing and transportation. The drying machines were employed by some ginners to ensure the quality for reserve trade, which decreased in inland. By 21st, total reserve trade of 2012/13 season was 4,852,000 ton, including 2,198,720 ton in Xinjiang, and 1,455,150 ton in inland, and 1,198,130 ton by key companies. The first top inland trading provinces are Shandong by 7.9%, Hubei by 7.4% and Hebei by 5.1%. Up to date, PCC reserve release of last season was 43,930 ton.

As reserve volume increasing, less cotton was available in the market, some textiles turned to CNCE and ZCE trade, both spot and futures price increased continually. Last weekend, CC Index328 settled at 19,129 Yuan per ton, 76 Yuan up over the week. ZCE cotton futures nearby contract CF301 continued to rise and closed at 20,855 Yuan per ton, 570 Yuan up over the week. CNCE nearby contract MA1212 settled at average price of 19,731 Yuan per ton, 441 Yuan up over the week.

The recovery of cotton seed price drove seed cotton price up in most cotton areas. According to CCA cotton processing industry branch, last week 17th /21st December, the weekly average procurement price for major type 428 was 8.19 Yuan per kilo nationwide, 0.01 Yuan up over the week. In Xinjiang, seed cotton market came to the closing period, with seed cotton reduced in quality, quantity and price, and nearly 90% ginners stopped trade. Inland market still had some high quality cotton; both buyers and sellers were active, bringing price upward.

As for import cotton price, FC Index settled at 86.24 cent/lb. which was 13,850 Yuan per ton under 1% tariff, 5,279 Yuan lower than domestic equivalent, and 14,729 Yuan per ton under sliding duty, 4,400 Yuan lower than domestic equivalent.