A senior official from the China Cotton Association has
predicted that China's cotton prices, having undergone several
slumps recently, will fluctuate within reasonable margins in the
months before the next harvest
Gao Fang, the association's secretary-general, told China
Daily that, "There will be no drastic ups or downs in the
coming months." She said the government's recent decision to
harvest 300,000 tons of cotton as national reserves at the highest
price of 11,500 yuan (US$1,390) will help stabilize the price and
prevent it from falling.
Cotton farmers have witnessed falling returns as they sell
cotton at 2,400 yuan (US$290) per ton less than last year. The
price on the spot market currently stands at about 11,500 yuan
(US$1,390) per ton, around 2,000 yuan (US$241) lower than before
the harvest in August.
Gao attributed the price drops to a bumper harvest both at home
and abroad and predicted that this year's output could reach
between 6.1 and 6.3 million tons, about 1.4 million tons more than
last year.
Market players are increasingly cautious of agreeing to large
and long-term purchases. Most signed deals are due to end before
March, according to Gao. This is why this year's cotton harvest is
much slower and might be one month later than the previous
year.
Some cotton spinners bought large stocks last September and
October at a peak price of 17,700 yuan (US$2,140) per ton. They
then found the price dropped to less than 13,000 yuan (US$1,572) in
May.
Uncertainty about next year's textile exports also impedes
cotton consumers' enthusiasm to stock cotton.
"Textile producers and cotton spinners are worried their
products will face more import limits from the United States and
other countries," she said. "They are watching and waiting for the
situation to get clearer before they dare to buy more cotton and
increase production."
Commenting on cotton imports, Gao said China still needs about
1.4 million tons next year. Next year's import quota of 890,000
tons, plus this year's remaining 500,000 tons, will resolve the
shortage overall.
Recent price changes did demonstrate that the country's cotton
sector is becoming increasingly market-oriented, Gao added. "Cotton
prices represent the interaction of demand and supply."
However, the sector is not yet totally market-driven as China's
numerous, sparsely located growers, mills and textile manufacturers
are slow to respond to market changes and price fluctuations, a
disadvantage sometimes resulting in dramatic price changes.
"China has more than 40 million rural families growing cotton
and 6,000 to 7,000 factories spinning cotton. Most of them are
small-scale and inefficiently operated," she said.
China's changing and open cotton market has created a number of
business opportunities to cotton information providers.
"All cotton-related businesspeople including growers,
collectors, distributors and consumers, are keener about this
market than ever before," said Tu Xinquan, a researcher from the
China WTO Studies Centre at Beijing's University of
International Business and Economics.
"There is a greater demand for detailed and precise information
from the domestic and international markets compared with a few
years ago when China's cotton market was quite isolated from the
global market," he said.
(China Daily November 11, 2004)
