Cotton Market: Output Reduction, Demand Contraction, Price Fluctuation, Impact On Acquisition

In November, cotton futures prices continued to decline. The fluctuation of cotton prices affects cotton farmers and cotton processing enterprises.

China's cotton looks at Xinjiang, which accounts for more than 90% of the country's raw cotton output. Recently, reporters interviewed many places in Xinjiang on the reasons for the decline in cotton prices, the impact on the industry, and the future development direction of the industry.

Reduced output and shrinking demand

According to the report of the Central Cotton Storage Information Center, the actual cotton planting area in 2023 will be 41.402 million mu, a year-on-year decrease of 4.768 million mu, or 10.3%; The cotton planting area in Xinjiang was 36.163 million mu, a year-on-year decrease of 3.155 million mu, or 8.0%.

Wang Li, dean of the School of Economics and Management of Shihezi University, said that supply and demand are the main reasons for the fluctuation of cotton prices. In terms of supply, affected by the low temperature in the cotton sowing period in the spring, the subsequent extreme weather, grain demand and the withdrawal of secondary suitable cotton areas, plus multiple factors such as Xinjiang's optimization of cotton industry layout, this year's cotton production reduction has become a foregone conclusion.

In the past, a decline in supply will inevitably lead to a rise in cotton prices, but the recent frequent foreign wars and conflicts, the Federal Reserve's interest rate hike and other serious effects on the demand side are the main reasons for this round of lower cotton prices.

However, some insiders believe that although cotton prices have declined in the short term, the global cotton production has decreased in general this year, which will play a supporting role in cotton prices later.

Cotton is an agricultural product with a long industrial chain, which involves many links from cotton planting, processing and circulation, spinning and weaving to textile and clothing. The decline of cotton price will have an important impact on all links.

Wang Li said that we should attach importance to the construction of the tenacity of the entire cotton industry chain, play the role of policy guidance, and concentrate resources and policy advantages through agricultural subsidies, technical training, market-oriented policies and other means to ensure the stability of cotton production, high quality and strong competitiveness of cotton in cotton suitable areas.

Price fluctuation affects acquisition

At present, the picking and selling of new cotton has entered the second half stage. As of November 9, the picking progress of new cotton nationwide was 87%, the selling rate was 75.4%, and the sales rate was 2.1%.

"Cotton planting has a target price subsidy to support the bottom, and the market purchase price is high, so everyone can earn more." With the arrival of the cotton harvest season, Yimin Abela, a villager in Ayikule Town, Aksu City, often goes to the nearby ginning plant to learn about the purchase price. This year, he planted 510 mu of machine picked cotton, which is expected to yield more than 400 kg per mu. The land transfer fee is 850 yuan per mu, and the cost of cotton planting per mu has reached more than 2900 yuan. "Over the years, high standard farmland construction and other measures have increased cotton production, and 300 kilograms of cotton per mu is a guaranteed yield. Now we are not in a hurry to sell cotton, but we want to wait and see," Yimin Abela said.

There are 48 cotton purchasing enterprises in Aksu City, and 41 enterprises have started to purchase at present. The fluctuation of cotton price affects the confidence of enterprises in purchasing cotton.

Aksu Tianquan Cotton Industry Co., Ltd. is one of the earliest local enterprises to purchase cotton. At present, it is purchasing hand picked cotton at 9.1 yuan per kilogram. "The price of hand picked cotton this year is more than 2 yuan higher than that of last year. The purchase of cotton started so early, mainly to complete the orders received by the company earlier." Chen Jian, the company's head, said that with the decline of cotton futures prices, the company has temporarily stopped purchasing cotton.

Wu Jianfeng, Chairman of Aksu Xingchang Cotton Industry Co., Ltd., is cautious about cotton purchase. "At present, the price of machine picked cotton is 7.4 yuan per kilogram, but the market demand is weak, and the daily purchase volume is 300 tons to 500 tons. The purchase of cotton adopts the strategy of going along with the price, as long as there is a little profit, it will be fast in and out, so as to ensure that the cotton does not hold down the position, and control the risk." Wu Jianfeng said.

The key to increase production of high-quality cotton

Quality is an important basis for the development of cotton industry, and cotton price is closely related to quality. In recent years, Xinjiang and Xinjiang Production and Construction Corps have attached great importance to the development of cotton industry, and constantly improved cotton quality to meet the demand of domestic and foreign markets for high-quality cotton by implementing the "one main and two auxiliary" seed use mode and other measures.

"This year, the Corps orderly promoted the withdrawal of several non advantageous cotton area farms from secondary cotton suitable areas, and promoted the concentration of cotton planting to production protection areas. The implementation scope of cotton quality traceability was expanded to all cotton planting divisions of the Corps, and measures such as a subsidy of 0.35 yuan per kilogram of fine staple cotton of 'Double 29B2' and above were taken to improve the quality of cotton of the Corps," said Wang Li.

"Large but not strong, many but not excellent is still a problem that puzzles Xinjiang's cotton industry. It is necessary to further enhance the scientific and technological support capacity of Xinjiang's cotton industry development." Arif Elsi, director of the Economic Crops Research Institute of the Xinjiang Academy of Agricultural Sciences, suggested increasing steady support for agricultural research institutions, and promoting talent training and introduction, Improve the scientific research and innovation ability of scientific research institutes, and increase the proportion of high-quality cotton by breeding and promoting breakthrough cotton varieties and simple and efficient cultivation techniques.

In addition, it can also further improve the level of agricultural production machinery and equipment, promote the whole process of mechanization of cotton production, promote the accurate application of fertilizers and pesticides, reduce labor, etc. to reduce production costs, improve the output per unit area, and increase the income of cotton farmers.

Wu Hongtao, vice chairman of Xinjiang Cotton Society and chairman and general manager of Xinjiang Tianyu Seed Industry Co., Ltd., said that the national target cotton subsidy price was 18600 yuan per ton, equivalent to 8 yuan per kilogram. According to the input-output ratio, the average output of cotton per mu is 400 kg, and cotton farmers will have income only when the comprehensive cost is 2800 yuan or more.

"The development of the cotton industry can not blindly pursue the output. It needs to improve the output on the premise of ensuring the quality, so as to promote the quality and efficiency of the cotton industry, promote the benign development of the industry, and improve the benefits of all parties," said Wu Hongtao.