Cotton Price Outlook in the Second half of 2011
Author: Sep 05, 2011 14:05
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Firstly, from January to July, cotton industry economic operation analysis.
1. Main features of cotton production. First of all, its cultivation area is recovered with the influence of its price rebound. Secondly, cotton grows well. In the former period, the weather is dry and hot, which is favorable for cotton growing. Although there are many droughts, the disaster stricken area is not that large. China cotton grow index (CCGI) from April to August is 121 points, which indicates that the cotton grow situation is better than that of last year. Thirdly, it will be a big harvest year. By 23rd Aug, cotton grows well, thus a big harvest can be expected soon. If there is no big weather disasters, cotton harvest this year is expected to hit a new peak, and it is also expected to be a good quality.
2. Cash invest in the first half is enlarged. Labor cost increased for 9 years in a row, showing a trend of mutual increase of labor and material cost. The survey shows, in the first half of the year, cash investment is totally 588.3CNY/mu, which increased 70.1CNY/mu, year on year comparison, and the increase amount is 13.5%. Among which, material cost increased by 52.1CNY/mu, increase amount is 74.3%, while labor cost increased 18.1CNY/mu, increase amount is 23.5%. It is evaluated that the whole year, cost increase will be around 202.1CNY/t, to 1444.7CNY/mu, increase amount will be around 14.0%.
3.Cotton yarn output and textile exportation growth fall back. From January to July, cotton yarn output is 16015 thousand ton, increase amount is 6.1%, year on year comparison, while the growth rate falls by 9.2%. It indicates that cotton yarn output in China market come to a turning point, but raw cotton consumption amount is still large and cotton shortage situation will not be changed. Jan-Jul, garment exportation 137.72 billion dollars, increase amount is 25.5%. Among which, from Jan to Jun, the price increased by 21.49%, amount is 3.88%, fall 12.5%. Knitting garment exportation 9.5 billion piece, take up 70.2% of the total garment exportation, increase amount is 3.68%. Domestic demand keeps enlarged. From Jan to Jul, garment retail above quota limit increased 23.5%, the quantity increase is not large.
4. Importation reduced. From Jan to Jul, raw cotton importation amount is 1480 thousand ton, lowering down 13.4%.
5.Cotton price stabilized when it comes into August, and it began to increase. In the first half of year, both domestically and abroad, cotton price rise and fall sharply month on month. China cotton price index dropped from 27915CNY/t in January to 22181CNY/t in July, the drop amount is 20.5%, in compare with the peak of 30733CNY/t in March, the drop amount is 27.8%. A index dropped from 182.66cents/bbl in Jan to 122.51cents/bbl in July, drop amount is 32.9%, in compare with the peak of 229.6cents/bbl in March, the drop amount is as big as 46.6%.
Cotton price drop trend stabilized in August, and recently it began to mount up. Month on month comparison, the Aug drop amount is 12.5%, A index drop amount is 7.4%. In the first three weeks of August, the drop amount is one digit number, while in the fourth week, the drop amount began to rebound.
Secondly, new cotton price outlook.
As is analyzed, there are three factors as temporary storage, cost and inflation that play the most important role to new cotton price trend.
1. Bulk acquisition brings support effect. The temporary acquisition price provided in March is 19800CNY/t, deduct 1000CNY/t of process and transportation fee is 18800CNY/t. 328 grade seed cotton price is 8.96CNY/t. With the support of temporary storage price, new cotton price tend to be stabilized.
2. With the boost of cost and inflation, new cotton price is likely to fluctuate upward. According to the survey, in the first half of year, material cost increased 52.1CNY/mu, on the basis of which, lint cotton cost will increase to 612.9CNY/t. The whole year labor cost is estimated to increase 150CNY/t, thus lint cotton cost will increase 1764.7CNY/t. Add material and labor cost up, we can calculate a total cost increase of 2377.6CNY/t, namely, on the temporary storage price of 18800CNY/t, we should add 2377.6CNY/t, a 12.6%, thus we can absorb the cost pressure. It is in coincidence with the forecast price of 21-22 thousand CNY/t in January. If add the increase amount of land rent and labor cost, the reasonable price is around 24-26thousand CNY/t.
Prevent inflation, stabilize commodity price is the prior task this year. CPI this year is to be controlled around 4%-5%, while in the first half, it is 5.4%, in July, it was 6.5%, hitting a new peak over the past three years. Economies recently think that there are three factors to judge inflation. Firstly, liquidity is controllable, but there is lagging, which may be the impetuous in the third and fourth quarter. Secondly, when will bulk goods price increase weaken? Of course, it is still uncontrollable with the influence of international importation. Thirdly, labor cost and material cost increase will be the durable force, it is still uncertain as for when will the turn point come?
Thirdly, Factors may influence new cotton price.
1. See from cost performance, grain price increased. The national grain price increased year by year. Wheat price in Huanghe area is 1.98-2.00CNY/kg, high quality wheat 2.2-2.50CNY/kg, the bottom protective price of 1.90CNY/kg has not been effected by the government. Grain price rebound is favorable to cotton price rebound.
2. See from futures market, from January to July, futures price slumped until August, it stopped to stabilized. Zhengzhou commodity exchange CF109 contract price slumped from 32645CNY/t in Jan to 20955CNY/t in July; the drop amount is 35.8%. Internationally, in New York Commodity Exchange, the Oct delivery futures price dropped from the peak of 152.53cents in Apr to 106.71cents/bbl in July, the drop amount is 30.3%. When it comes into August, futures price in the second week of the month decreased. New York intercontinental Oct futures price drop amount is 5.67%, while Zhengzhou commodity exchange CF109 contract drop amount is 1.67%, and it was stabilized in the third week. If the U.S. put forth the third quantitative easing policy, the price upward room will be bigger.
3. See from cotton woven market. It takes too long to absorb the high price cotton. First of all, take a view of the history, in 2003, it takes less than half a year; in 2004, the low price cotton brought about notably dilution effect; while this year, there is no impetuous, for the international cotton price is higher than that of domestically and it lacks of consuming driving force. Secondly, temporary acquisition price brings a big shock to the market, which makes the high price cotton in 2010 hard landing.
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Editor: Candy From: 168Tex.com
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