China International Cotton 2023 Conference "Sustainable Development: The Future Of Cotton" Held In Guilin, Guangxi

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Recently, the 2023 China International Cotton Conference, co sponsored by the China Cotton Association and the National Cotton Trading Market, and supported by Zhengzhou Commodity Exchange, was held in Guilin, Guangxi. The conference took "sustainable development: the future of cotton" as the theme, and representatives from relevant government departments, industrial organizations, cotton merchants, textile enterprises, etc. at home and abroad focused on the current macro environment The current situation and development trend of domestic and foreign cotton markets, and the high-quality development of futures service cotton industry were discussed in depth to provide advice and suggestions for the sustainable development of cotton industry.

Since this year, with the gradual recovery of market demand, the cotton textile industry has made a good start, driving the price of cotton and cotton yarn to rise gradually, laying a good foundation for promoting the high-quality development of the cotton industry. According to the statistics of China Cotton Association, in 2022, China's cotton planting area will be 44.8835 million mu, up 3.3% year on year, and the total output will be 6.622 million tons, up 14.7% year on year. The China Cotton Association predicted that in 2022/23, the national cotton consumption will be 7.6 million tons, an increase of 4% over the previous year.

Cotton textile industry has strong tenacity

"Cotton is an important agricultural product and raw material for textile industry. It has a long industrial chain and covers a wide range of areas." Hou Shunli, member of the Party Leadership Group and deputy director of the Council of the All China Federation of Supply and Marketing Cooperation, secretary of the Party Committee and chairman of the China Supply and Marketing Group, pointed out at the meeting that China is a major country in cotton production, consumption, trade and textile and clothing exports, The cotton industry is directly related to the interests of cotton farmers and the development of the textile industry, and also affects foreign trade and stable employment.

Gao Fang, president of the China Cotton Association, said that in recent years, in the face of difficult challenges, China's cotton and textile industries have shown strong resilience and quick response capability of the supply chain, production, consumption and textile exports have remained stable, and some indicators have shown growth highlights.

Specifically, in 2021, China's textile and clothing exports will reach 315.46 billion US dollars in the whole year, up 8% year on year, relying on strong supply chain capacity under the situation of logistics obstruction and loose US dollar liquidity caused by the epidemic; In 2022, under the influence of adverse factors such as rising prices of raw materials and energy, commodity shocks, and US dollar interest rate hikes, China's textile and clothing exports will reach 323.35 billion US dollars, up 2.5% year on year.

"Since this year, the economic operation has continued to recover, the consumption expectation has improved, the domestic cotton textile market has recovered rapidly, the whole industry chain has operated better than expected, the cotton demand has increased, and the cotton price has fluctuated upward." Wang Jianhong, deputy director of the Agricultural Means of Production, Cotton and Hemp Bureau of the All China Federation of Supply and Marketing Cooperation, a first level inspector, and the executive vice president and secretary-general of the China Cotton Association, believes that, With the continuous expansion of the consumption scene and the gradual rise of residents' consumption tendency, China's cotton textile market is expected to continue to recover.

Zhang Xi'an, Vice President of the China Chamber of Commerce for Import and Export of Textiles, said that against the backdrop of shrinking overall foreign trade demand and expected weakening, China's overall foreign trade export volume from January to May this year was basically flat, with an increase of only 0.3%. Among them, the cumulative export of textile and clothing reached US $118.2 billion, down 5.3% year on year, weaker than the export of the whole foreign trade. However, the year-on-year decline of China's textile and clothing export in the past two months has gradually narrowed, and China's textile and clothing export is recovering difficultly.

"The new situation requires us to think about the future." Gao Fang believes that China's cotton industry is based on the basic national conditions of the small farmer economy and China as the largest developing country. Ensuring the income of cotton farmers, promoting quality improvement, opening up production and consumption, and promoting regional coordination are the basis for sustainable development.

Futures escort cotton enterprises

Ensuring the stable and safe supply of primary products, stabilizing the prices of primary products, and enhancing the influence of the prices of important bulk commodities play a very important role in promoting the sustainable, stable and healthy development of the economy. Song Gelong, vice president of the China Institute of Macroeconomics, said that the futures market has great potential in serving the supply and price stability of primary products. Cotton practitioners should be good at using the futures market for risk management.

In recent years, the development of cotton industry is inseparable from the development of futures market. Ma Chi, deputy general manager of Dongzheng Runhe Capital Management Co., Ltd., said that since the listing of cotton futures in 2004, after nearly two decades of development, the futures derivatives market related to cotton has developed relatively well. There are not only over-the-counter futures and options, but also a large number of over-the-counter options institutions, providing a series of derivatives services for real enterprises. At the same time, Zhengzhou Commodity Exchange has also continuously improved the relevant delivery system and optimized the layout of the delivery library. This makes cotton related futures derivatives more and more close to the market and better play the role of serving the real economy.

The representatives of cotton enterprises attending the meeting believed that the risks faced by cotton enterprises mainly included the following aspects: First, in the process of listing agricultural products, due to the impact of centralized oversupply, the price may fluctuate significantly. Second, purchasing enterprises may need to carry out centralized procurement when products are launched, resulting in long-term occupation of funds. In addition, the downstream consumption of agricultural enterprises is characterized by decentralized demand. Therefore, the upstream purchasing enterprises are characterized by large capital occupation, high inventory and high debt.

With the gradual improvement and maturity of the futures market, more and more cotton related enterprises begin to use the risk management and price discovery functions of cotton futures to serve enterprises, and use financial derivatives such as futures or options to avoid the risk of price fluctuations for enterprises.

"There are huge opportunities in the mutual benefit zone of futures derivatives and cotton industry." Ma Chi stressed that enterprises need to establish a sound risk control system in the process of participating in futures trading, especially some small and medium-sized private enterprises, which have relatively weak anti risk ability. This requires the conversion of various hedging instruments under the premise of controllable risks, Seize the market opportunity.

"For enterprises, when agricultural products are listed, they can purchase agricultural products through the comprehensive business platform of Zhengzhou Commodity Exchange, that is, the warehouse receipt trading platform. At the same time, they can sign a long-term hedging agreement with agricultural enterprises to guarantee the price and stable supply, and provide future product supply and prices in the future, which can avoid the operating costs and market risks caused by the mismatch between time and time." Liu Xinyan, a senior trader in the financial market department of the head office of Shanghai Pudong Development Bank, introduced that enterprises can avoid the risk of price fluctuations and reduce the risk of