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Cotton planting inventions promising in xinjiang and reduced in inland, reserve release started

Cotton planting inventions promising in xinjiang and reduced in inland, reserve release started Source:
Date: 05-02-2013
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Reserve purchase that practiced two year in a row protected cotton growers in the bear market. The year of 2012 is a bumper year for Xinjiang cotton, the unit output of which increased by 12.7%, and profit for per mu increased by 17.2%, stabilizing the cotton growing intension for next year; however, cotton planting intentions continued to decline in inland areas. According to survey done by local cotton associations in Hebei, Jiangsu, Anhui and Dezhou, Shandong provinces, the cotton planting intentions for 2013 reduced from 3% to 15%. To summary the causes, first, labor for planting is insufficient.

As urbanization and industrialization go on, more rural labors moved to cities for jobs, leaving low efficient labors like seniors or women. Second, cotton does not have much comparative profit in contrast with food crops. Cotton planting is labor and time consuming, with 40% less comprehensive machinery rates, while 3 or 4 times labor input than wheat, which enjoyed more subsidies, increasing flooring price, and more stable annual profit. As a result, cotton field was taken by food crops continually.

Third, natural adversities happened in much frequency in recent years. During recent two years, cotton in Hebei, Shandong, Tianjin encountered with lasting heavy rain during the middle and late growing stages, bringing large reduction in seed cotton quality and quantity, then serious losses to growers. Forth, production materials prices remained high. Price of seed, chemicals and fertilizers increased by 5%-10% annually, especially at their wanting seasons. Therefore, many growers held the opinion of reducing or stopping cotton planting, if the cotton reserve purchase price increase was lower than that for food crops.

Last week, reserve release started. At the beginning, the transaction was quite active at higher price than equivalent spot price, at more than 80% completion rates, due to rather low material stock levels of textiles and the replenishment needs from the coming Spring Festival. On 18th, announcement was made to promise sufficient supply, thus the transaction rates and price declined moderately.  By 18th January, reserve released 318,000 ton of cotton to the market, 174,000 ton of them being sold, and the transaction rate was 54.81%. During the corresponding time, reserve purchase of 2012/13 season was 5,789,000 ton, 84% of the annual production, including 2,492,100 ton in Xinjiang, 181,400 ton in inland, and 1,482,500 ton by key enterprises.

The reserve release acted smoothly, bringing no large impact to spot or futures market domestically. Last week, 14th/18th January, CC Index328 settled at 19,287 Yuan per ton, 29 Yuan up over the week; ZCE cotton futures nearby contract CF303 settled at 19,980 Yuan per ton, 200 Yuan up over the week; CNCE nearby contract MA1301 has average price of 19,235 Yuan per ton, 3 Yuan lower over the week. Procurement price for seed cotton was also stable, according to survey by CCA cotton processing industry branch, last week, major type 428 has weekly average price of 8.30 Yuan per kilo, 0.01 Yuan lower over the week in inland provinces.

Influenced by reduced planting expectations of US cotton, strong export figure, and depreciation of US dollar, the international cotton price continued to increase this week. As for import cotton price, by weekend FC Index settled at 87.7 cent/lb., 1.74 cent up over the week.
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