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Future of cotton industry remains skeptical

14
Nov '08

With global recession and all-round financial crunch the demand from downstream markets has shrunk drastically. This has had a quantum impact on cotton industry of China, as supply is much larger than demand.

This situation has led to dramatic decline in prices. Reports show that domestic cotton price in China plunged over 40 percent in eight months from its highest point in March.

Infact, this year, cotton-planting cost increased and seed cotton cost rose to 6 yuan per kg. However, now seed cotton price slid to 4.6 yuan per kg, which is lower than planting cost line.

Statistics from Zhengzhou Commodity Exchange showed, cotton futures price hit 17,660 yuan per ton in March, but it dropped all the way down to 10,000 yuan per ton in recent times. This clearly marks a plunge of more than 56 percent.

With continued weakening of domestic cotton price, most people in the market are understanding the trend and are skeptical about the future.

Textile enterprises have reduced cotton stocks, in order to avoid price risks, some textile enterprises with relatively strong funds have also lowered their inventories of raw materials. This has led to a sharp fall in average stocks of domestic cotton textile enterprises for October.

Among surveyed enterprises,76 percent reduced their cotton stocks, 18 percent increased their cotton stocks; the average cotton stock level decreased from 32.03 days by the end of September to 27.74 days at the end of October, or from 1,019,000 tons down to 886,000 tons when convented into cotton industry inventories.

Relevant departments said, the state will further increase cotton reserve quantity in a timely manner based on requirement of the market, at the same time, the state will have strict control over cotton imports in 2009. It is reported that the state has so far introduced cotton procurement policy for three times this year.

Fibre2fashion, News Desk - China

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