Cotton Textile Industry Downturn, Domestic Cotton Market Downturn

The monthly supply and demand report released by the US Department of agriculture yesterday showed that China's cotton output is expected to reach a record 7 million 729 thousand tons in 2008.

As China's domestic cotton production has increased, cotton textile industry has been sluggish and demand is insufficient, the domestic cotton market has been under great pressure, and domestic cotton prices have continued to decline this year.

Some market analysts believe that, despite the recent state support policies for cotton and textile industry, the decline of textile industry in the short term is difficult to reverse, and the cotton market is hard to get stronger.

In August 12th, the latest monthly demand and supply report released by the US Department of agriculture predicted that China's cotton output will reach a record 7 million 729 thousand tons in 2008/2009, while the 2007/2008 released by the National Bureau of statistics in China will reach 7 million 600 thousand tons.

The US Department of agriculture predicts that China's total cotton consumption will be 11 million 648 thousand tons in 2008/2009, of which 2 million 830 thousand tons of imported cotton will be imported, and the final inventory will be 3 million 471 thousand tons.

The United States Department of agriculture also predicted that the world's cotton production in 2008/2009 was 24 million 420 thousand tons, which was 2.4% lower than the July report, mainly due to the reduction in production in countries such as India, Australia and the United States.

China is the largest cotton producing and consuming country in the world. Over the past few years, along with the rapid growth of China's textile exports, China's cotton consumption has continued to grow. However, in 2008, China's textile industry was faced with unprecedented difficulties, the cost of production and employment increased, the sales of products were sluggish, and the backlog of stock was serious.

The sluggish demand for textile enterprises has led to a continuous fall in domestic cotton prices.

The cotton futures 0901 contract of the Zhengzhou Mercantile Exchange has fallen from the price of 17000 yuan / ton earlier this year to the current 14000 yuan / ton.

In order to support the domestic cotton and textile industry, in June 23rd, the Ministry of Finance issued a notice, decided to subsidize Xinjiang cotton in Xinjiang, and subsidized 400 yuan per ton for the Xinjiang cotton. In late July, the Agricultural Development Bank issued the "China Agriculture Development Bank's grain and cotton marketing loan method", which increased the loan support for the cotton circulation enterprises. In July 30th, the Ministry of Finance and the State Administration of Taxation issued a notice to raise the export tax rebate rate of most textiles and all garments products from 11% to 13%.

However, the cotton Market Weekly Bulletin released by China Cotton Association in August 11th showed that although the policy of raising export rebate rate of textile and garment has been formally implemented, it has not brought a noticeable reaction to the cotton market.

Since August, the pure cotton yarn market has been running smoothly, with little change in price and general sales.

Because of the shortage of funds, textile enterprises continue to maintain the strategy of "buying and selling with their products"; on the other hand, because of the relatively abundant domestic cotton resources and new cotton coming soon, cotton enterprises must repay loans in time, prepare for the acquisition of new cotton, and continue to increase sales power.

Market demand and sales promotion increased, resulting in domestic cotton prices continued to fall.