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Govt to intervene & purchase cotton if prices fall further

17
Oct '08

Authorities at all levels have reached an agreement that they will purchase new cotton from the farmers in time, if cotton price falls sharply after new cotton arrives in market, so as to ensure that the new season cotton price will remain at a relatively reasonable level.

Since the beginning of 2008, domestic cotton prices has continued to decline, due to multi-factors such as substantial fall in international market prices and also drop in demand from local enterprises.

According to China Cotton Association, inland purchase price of standard seed cotton averaged at 5.54 Yuan / kg in mid-October and averaged 5.12 Yuan / kg in Xinjiang, both down 0.08 Yuan/ kg, respectively, from the beginning of the year.

Chinese cotton price index (CC Index328) fell from 13,464 Yuan / ton on September 1 to 12,512 Yuan / ton on October 15, down by nearly 1000 Yuan per ton.

Due to continuing decline in prices, cotton-processing enterprises are more cautious while entering the market. On one hand, rising costs and low sales prices have compelled cotton growers to hold on to their stocks on expectations of higher prices, while on the other hand cotton processing companies are adopting a wait and watch attitude, due to which an impasse has emerged in the once vibrant cotton markets.

The peak selling season begins in mid-October, but sales in seed cotton market this year are very quiet. This is expected to seriously damage the interests of cotton growers which in turn may impact their initiative to grow cotton in the next season which will also be detrimental to the stability of China's cotton market.

Recently, National Development and Reform Commission, Ministry of Finance, Agricultural Development Bank of China and other departments have taken a decision to purchase cotton from Xinjiang.

The purchasing will be effected through public auctions at National Cotton Exchange, with the maximum purchase price tentatively set at 12,600 Yuan / ton (at Xinjiang warehouses) and provisional purchase quantity is planned to be 220,000 tons.

Fibre2fashion News Desk - China

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