Four Factors Affect Cotton Consumption In China

In June 21st, the "high level Academic Summit on cotton in 2011" held by the China Cotton Storage Information Center was held in Beijing for two days. The meeting was aimed at strengthening academic exchanges in the international cotton industry, improving the level of global cotton production and demand data analysis and forecasting, analyzing the future trend of global cotton supply and demand, and promoting the sustainable development of China's cotton industry.

Senior officials, authoritative experts and scholars from major cotton producing countries and consuming countries, leaders of domestic departments, cotton research institutions and some well-known cotton and textile enterprises leaders have discussed the data analysis and research results of this year's and future global cotton production and demand projections.

We will report on the analysis and forecast of cotton output, consumption and inventory in China, hoping to help textile enterprises to grasp the cotton situation.

Domestic cotton output to maintain 6 million 500 thousand tons

Huang Jiacai, director of agricultural production department, Department of rural social and economic investigation, National Bureau of Statistics

Affected by various factors, cotton production in China has been greatly fluctuated in recent years. From 2008 to 2010, cotton production has been greatly reduced, and the area of cotton sowing has fluctuated greatly. From 2006 to 2010, the area of cotton has decreased by 3 million 196 thousand mu, with an annual decline of 0.7%.

At present, there are three factors restricting the development of cotton production in China.

First, the comparative benefits of cotton and grain.

The uncertainty of cotton efficiency is very large, mainly because of the large price fluctuation and the risk of low price and difficult to sell.

And the expected grain efficiency is stable. The State supports grain prices steadily rising, and the minimum annual purchase price has been improved.

Compared with the two, most farmers are more willing to grow grain.

Secondly, cotton planting mode and technology restrict cotton production.

The low degree of mechanization of cotton planting requires more time for field management. Today, as labor prices continue to rise, this seems to be a weakness in cotton planting.

In addition to Xinjiang, most other cotton regions in China are mainly cultivated by individual farmers, with few concentrated planting, which limits the application of many production techniques in cotton production.

Because of its small scale, farmers' enthusiasm for applying new planting techniques is not high.

Thirdly, the government has paid more attention to grain production, and has not encouraged the policy of cotton production and allowed it to develop freely.

The development trend of cotton production in China is likely to be further reduced, especially in traditional cotton areas.

With the grain production subsidies further in the Xinjiang area, the sowing area of cotton is also decreasing.

Therefore, in the next long period of time, the sown area of China's cotton will fluctuate between 70 million mu ~8000 mu.

In the past 5 years, the cotton yield per unit area has been lingering and has not been greatly improved.

If there are no new high-yielding varieties, the yield of cotton will hardly increase significantly.

A comprehensive analysis shows that China's cotton output will fluctuate around 6 million 500 thousand tons in the next few years.

Cotton consumption tends to decline in the future

Feng Mengxiao, chief information officer of cotton store information center

There are four major factors affecting cotton consumption in China.

First, China's labor supply will restrict the development of the textile industry.

Demographers believe that the net increase in China's working age population will be zero in 2015, and the number of working age population will be reduced, and the shortage of labour will become more serious.

In recent years, the difficulty of recruiting Chinese enterprises has become increasingly serious.

A recent survey of China's cotton net shows that 72% of the textile enterprises believe that recruitment is difficult, and 89% of the enterprises show a substantial increase in wages over the previous year.

Second, competition between cotton and substitutes intensified.

In recent years,

Third, the huge pressure on foreign exchange reserves will change the pattern of China's textile trade.

At the end of 3 2011, the balance of China's foreign exchange reserves reached 30447 billion US dollars, up 24.4% over the same period last year.

At present, inflation pressure is rising, liquidity is surplus, the US dollar is depreciating for a long time, and the RMB is increasing day by day. China urgently needs to control the excessive growth of the scale of foreign exchange reserve.

The pattern of China's textile trade is facing adjustment. The direction of trade policy will be changed from encouraging foreign exchange earning to promoting domestic consumption, and the textile production capacity will be restricted.

Fourth, environmental protection, energy and land constitute constraints on the development of the textile industry.

In recent years, China's energy conservation and emission reduction efforts have been increasing. The total amount of waste water discharged from the textile industry accounts for about 6.5% of the domestic industrial wastewater discharge. The printing and dyeing industry's production capacity can not meet the needs of upstream and downstream industries.

Since April this year, more than 10 provinces in the country have appeared "power shortage" in the off-season.

A recent survey of China's cotton net shows that power sluice severely affects the production of textile enterprises. 28% of the enterprises' capacity drops by 10%, and 32% of enterprises drop to 10%~30%.

In addition, the rapid rise in land prices caused the shortage of land for textile enterprises, and the rent of factory buildings rose significantly.

Overall, China's textile industry will continue to maintain a larger scale in the future, but there is limited room for expansion in the cotton textile industry.

In the future, the structure of textile raw materials will undergo great changes. The utilization of recycled fiber will increasingly be taken seriously. The proportion of chemical fiber and regenerated fiber will gradually increase, and the proportion of cotton will tend to decline.

These factors have a long-term impact on cotton textile industry.

In view of the relatively complete infrastructure in China, the regional characteristics of economic development are obvious, the textile industry chain is relatively perfect, and there is little possibility of significant capacity reduction before 2015.

The consumption of 11 million 200 thousand tons of cotton in 2006 will become the peak of history.

China's cotton consumption will remain within 10 million tons in the future. The scale of cotton consumption is expected to remain at 8 million ~900 million in 3~5. Cotton production will be 6 million ~700 tons, and the proportion of cotton imports and consumption will be around 20%.

Inventory changes affect cotton price operation

Cheng Jie, director of research center of cotton storage information center

Although cotton prices are affected by various factors other than inventory, in the long run, inventory changes play a fundamental role in cotton price movements.

After the reform of China's cotton market circulation system, the correlation between cotton inventories and prices has increased significantly, and the correlation coefficient has reached -0.56 in the past 10 years.

{page_break}

China's cotton stocks show seasonal characteristics.

The lint inventory in this year is higher than that in normal year.

As of June 17th, the sales rate of purchasing enterprises was 75.6%, 16.6 percentage points down from the same period, 8.3 percentage points lower than the normal year in the past 4 years.

According to the estimated cotton output estimated at 6 million 230 thousand tons in the country, the total purchase of 6 million 100 thousand tons of lint cotton, 4 million 610 thousand tons of lint and 1 million 600 thousand tons of lint cotton are all over the country, which is 960 thousand tons more than that of the same period last year.

The inventory of cotton industry in China shows a more obvious quarterly character.

Overall, the level of industrial inventories has been increasing since the beginning of the year.

Compared with the previous year, the industrial inventory level of textile enterprises in 2010 has declined since April, and is expected to further return to the year-round level in the latter part of the year.

According to the sampling survey of the national cotton market monitoring system, as of June 8th, the national cotton industry inventory was equivalent to 36.9 days of cotton consumption, about 1 million 10 thousand tons, a decrease of 3.1%, a decrease of 1.5% compared with the average inventory in the past three years.

China's cotton inventory level has a significant impact on the global total.

In the past 10 years, the end inventory of cotton in China is highly correlated with the global total level, and the correlation coefficient between them is 72%.

The cotton inventory structure at home and abroad tends to be unbalanced in the new year. The era of high cotton storage in China has ended.

The difference between domestic and foreign stocks has promoted the import of cotton.

High inventory will promote the return of international market prices.