Cotton Prices Approaching 15 Years Peak Clothing Enterprises Complain

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As the largest textile producing country in the world, cotton and wheat and maize rely mainly on domestic capacity for self-sufficiency. China's cotton imports have been relatively large.

In the case of soaring international cotton futures prices, the pressure on domestic cotton prices should not be underestimated, and this has already been pmitted to downstream related industries.

"Cotton's replacement product PTA has been rising very well recently. For cost reasons, some garment manufacturers will reduce.

Current situation analysis

The weather is "causing trouble", the international cotton price is approaching the peak of 15 years.

Since August, the CCF1101 price settlement of cotton futures contract of Zhengzhou Mercantile Exchange has increased by 4.5%.

Analysts said that the strengthening of the price of Zhengyang cotton is directly related to the recent violent trend of international cotton futures prices.

In August 13th, the US Department of Agriculture announced monthly global agricultural products (18.28, -0.25, -1.35%) production forecast report. The end of last year's 2010/11 cotton inventory was reduced to 45 million 610 thousand packets from 49 million 610 thousand packages estimated last month (1 packs of 480 pounds or 218 kg).

In the last 3 months, the price of international cotton futures has climbed steadily, and has reached the highest level in 15 years.

"Global cotton market"

The United States Department of Agriculture said that the harvest area of cotton farmers around the world will be the lowest level in more than 20 years, and the growth rate of global cotton production has not kept pace with the pace of demand growth for 15 consecutive years.

According to its forecast in July, the inventory consumption ratio will decrease to 41.7% next year, the lowest since 1994/1995, which will support the high price of cotton.

Like wheat and other grain crops, cotton is also suffering from a severe shortage of supply and demand.

Over the past 3 months, many provinces in southern China have encountered ten years of catastrophic flooding.

According to incomplete statistics, as of July 30th, China's floods destroyed 9 million 200 thousand hectares of crops.

A market report predicts that the flood will lead to a reduction in cotton production in China by 5%-10%.

The floods in Pakistan were even more serious, with 16 million people affected and 30% of the country's cotton fields destroyed.

This directly causes Pakistan, a traditional cotton exporter, to become a net importer of cotton in 2010.

Unlike wheat and corn, which rely mainly on domestic capacity for self-sufficiency, China's cotton imports have been relatively large.

Therefore, in the case of soaring international cotton futures prices, the Central Cotton store decided to auction the national cotton reserve 600 thousand tons from August 10th to stabilize domestic cotton prices through the national cotton trading market.

Trend judgement

Cotton prices will rise sharply and domestic demand for 1/3 cotton needs to be imported.

From the current situation, "cotton prices fall in limited space, and then the market trend, we should take into account the weather factors and downstream demand and many other aspects."

Liu Qingli said.

Although the supply and demand gap of cotton is narrowed globally, there is even a forecast of oversupply.

But domestic supply and demand gap is still expanding slightly.

According to USDA7 forecast, cotton production in China will reach 7 million 185 thousand tons in the next year, and consumption will remain at 10 million 669 thousand tons, with a difference of 3 million 484 thousand tons and a shortfall of 218 thousand tons.

"From the perspective of demand, the global economy is in the process of recovery, and our textile exports are gradually recovering, and the demand for cotton is expected to continue to rise steadily."

Liu Qingli thinks.

Some analysts pointed out that there are still some uncertainties.

Because the influence of early weather on cotton is still relatively large, this year's seedling situation is obviously worse than in previous years.

In addition, the main cotton producing areas in Xinjiang were affected by extreme weather at the early stage of sowing, and some cotton fields were replanted. If the frost period arrived earlier, the quality and yield of cotton would be adversely affected.

Next year, domestic cotton shortage is mainly supplied by imports.

COFCO futures analyst Li Jiagui said, but at present, there is not much reserve for national cotton reserves, and the possibility of throwing it in the next year is almost zero, and once the cotton price is lowered, the storage and storage measures will start immediately.

Therefore, next year, China's cotton shortfall will rely heavily on imported cotton. 1/3's demand for cotton needs to be offset by imports.

In this way, the initiative of cotton prices will be more controlled by foreign businessmen and the domestic regulatory room will be narrowed.

Li Jiagui also pointed out that even if the weather conditions are good in late period and the cotton production is high next year, the global cotton inventory consumption ratio will still linger in the low position.

In addition, China's cotton gap is still at a high level, and domestic and foreign cotton does not rule out a situation of linkage rise.

Industry impact

Cotton prices rise 5%, garment enterprises profit decreased by 2%

Ling Fangcai, chairman of Guangdong textiles import and export Limited by Share Ltd, said that the rise in cotton prices has already had a great impact, which will directly affect our production costs, leading to a decline in our profits and a decline in the competitiveness of our enterprises.

At present, the contracts already signed must continue to perform, but in fact they will be losses. The future quotations will be raised accordingly, otherwise they will not be able to cope with the pressure brought by the rising cotton prices.

However, the rising price of cotton is a problem facing the world.

It is estimated that cotton prices will definitely rise next year. At present, the price of top cotton is nearly 19000 yuan per ton, and next year it will probably exceed 20000 yuan.

Pan Rihui, Secretary General of Dongguan textile and garment industry association, reflects that cotton prices have been rising for nearly a year.

As cotton accounts for about 40% of the total clothing cost, according to estimates, cotton prices rise by 5%, and corporate profits will drop by 2%.

It is worth noting that at present, the profits of China's textile industry are very thin, even less than 3%, so once cotton prices rise sharply, enterprises can only choose to raise prices.

But in the context of the global economic downturn, consumers are trying to tighten their wallets, and it is difficult to raise prices.