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Cotton markets to emerge stronger

25
Mar '10
China is the world's largest cotton producer and consumer country and in the cotton year 2008-09, the country produced more than 7.5 million tons of cotton in 2008, but down 1.6 percent from the previous cotton year.

In the 2009-10 season, cotton-growing area reduced to 23 million Mu (one hectare=15 Chinese Mu) in the most important cotton-producing region of Xinjiang, down 1.4 million Mu and 4.6 million Mu, respectively, from 2008-09 and 2007-08.

As the government continued to increase purchase price of food, the returns from growing food grains are higher than growing cotton, resulting in increased grain planting area and reduced cotton acreage.

However, in the current cotton year, prices have flared up to unprecedented levels. On January 7, 2009, cotton spot CC Index229 stood at 11,593 Yuan / ton and the CC Index328 was at 11,053 Yuan / ton.

As of March 16, 2010, CC Index229 quoted at 15,875 Yuan and CC Index328 at 15,502 Yuan, an increase of 4,282 Yuan or 36.94 percent and 4,449 Yuan or 40.25 percent, respectively within a period of around 70 days.

The main reason for the price flare-up is attributed to growing demand for the white gold as the global economy shows signs of recovery and secondly cotton production is expected to fall in a few cotton producing countries in the current season.

The Zhengzhou Main Cotton Contract 009 breached the 17,000 Yuan per ton mark on March 9, 2010, however, the sharp adjustment in US cotton markets, dragged down the trend of domestic cotton.

But now with the price adjustment complete in the US cotton markets, China's cotton price again broke that line, which portends a strong price trend in the coming days.

Fibre2fashion News Desk - China


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