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Cotton prices expected to be range bound

19
Jan '12
2011/12 cotton price is expected to be range bound between 19,500 to 25,500 Yuan / ton under combined factors, such as supply being higher than demand and state cotton purchase and storage.

After hitting a record high in the first quarter of 2011, China's cotton spot and futures prices stepped onto a boundless bearish road, domestic cotton market entered into a shocking and bottoming phase till mid-October, when the government announced state plan of temporarily purchasing domestic cotton at 19,800 Yuan / ton as a policy.

Global cotton production is expected to reach 123.4 million bales in 2011/12, about 27.148 million tons, an increase of 8 percent from the previous year, creating a record level; global consumption is expected to be only 24.49 million tons, down 2.48 percent from last year, cotton production is about 2.658 million tons higher than consumption.

Chinese textile enterprises are facing double pressures of high inventory and high operating costs, in addition, the pressure of RMB appreciation greatly weakens international competitiveness of China's textiles, and therefore, cotton demand from the textile industry is sluggish.

As materials and labor costs significantly rise, currently the income generated by the cotton crop have lost its comparative advantage vis-à-vis other crops, that compete for land with cotton.

The national policy of purchase and storage provides a good policy platform, by insuring and protecting interests of farmers.

Fibre2fashion News Desk - China


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