Cotton prices to maintain volatility

24 Nov '10

2 min read

Recently the Chinese Ministry of Agriculture reported that as domestic and world cotton production area continuously declines and at the same time, demand of textile industry strongly picks up, supply and demand situation is tightening, leading to cotton prices hitting record highs.

Purchase price of seed cotton grade 3 was 11.40 Yuan / kg in October, up 42.3 percent year on year. The average price of cotton grade 328 increased from 14,932 Yuan / ton in January to 24,701 Yuan/ ton in October, up 80.9 percent.

Cotlook A index climbed from 77.39 cents / lb in January to 127.48 cents/ lb in October, up 90.8 percent, to set the highest point since 2003.

With new cotton arriving into the market, international cotton prices are expected to drop slightly, however domestic prices are expected to maintain volatility at high price levels, due to strong demand.

The Ministry of Agriculture estimates that, national cotton planting area in 2010-11 season has declined to 76.851 million Mu (one hectare equals 15 Chinese Mu), down 47,900 Mu from the previous year, or a reduction of 0.06 percent.

Overall output will be unchanged or slightly reduced from the previous year. Imports will substantially increase. China's total cotton imports reached 2.1525 million tons in the first three quarters of 2010, an increase of 99.7 percent year on year.

According to the latest survey by the monitoring system of national cotton market on November 19, national cotton-growing area is 75.682 million Mu this year, a decrease of 1.1 percent year on year; cotton yield is 84.0 kg / Mu, down 4.4 percent year on year; total output is expected to be 6.36 million tons, down 5.5 percent year on year.

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