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Cotton prices will continue to rise

Views: 0     Author: Site Editor     Publish Time: 2021-11-05      Origin: Site


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(1) The strong cotton price is well-founded

Domestic cotton market


First, since Xinjiang opened the market to acquire new cotton, although the closing price of seed cotton has fluctuated, the overall trend has continued to rise. After the National Day, due to the conversion of new cotton costs, most of the flower factories in southern and northern Xinjiang stopped reporting and harvesting seed cotton. However, cotton farmers have high expectations for new cotton and it is difficult to keep prices down. At present, the price of machine-picked cotton in northern Xinjiang is still above 10.5 yuan/kg, and some are around 11 yuan/kg; Nanjiang Flower Factory is a little cautious, and the actual machine-picked cotton price is around 10.3-10.5 yuan/kg.

Secondly, the progress of new cotton sales this year is slow, because the progress of new cotton this year is 7-10 days later than last year. According to Longzhong Information's monitoring data on the operating rate of domestic cotton processing enterprises, the operating rate of the ginning plant was about 80% year-on-year last year, and the operating rate this year was less than 50%.

Finally, this year's domestic cotton production is not as good as last year. Last year's total cotton output was around 6.15 million tons. This year's total cotton output is estimated to fall to around 5.6 million tons, mainly due to the decline in Xinjiang's yield per unit area and the substantial reduction in the area of cotton planted in the Yellow River and Yangtze River basins in the interior. In addition, this year, Shandong, Hebei and other places have a lot of rain from September to October. It is the time when cotton is concentrated, and continuous rain has caused a significant decline in the quality and quantity of cotton.


Foreign cotton market


The United States is the world's largest exporter of cotton. This year, due to the impact of the natural environment and insect pests, the cotton planting season in the United States is not smooth this year, which will inevitably lead to a shortage of US cotton in the market. The cotton harvests in India and Brazil this year are not as good as in previous years, and there has been no significant contraction on the market demand side. Under such a situation of short supply, it has boosted global cotton prices.


(2) The status quo of the supply chain


As an important raw material for textile processing, the price increase of cotton has further triggered the increase of costs in the relevant industrial chain. However, the current yarn prices and orders are not performing well. Textile and apparel companies are partially affected by the "dual control" policy, and they have faced many supply chain issues such as container shortages, Vietnamese factory shutdowns, labor shortages and rising transportation costs. The price increase of cotton puts domestic garment foreign trade enterprises under great cost pressure, which will inevitably squeeze the profits of garment foreign trade enterprises.


(3) Macro policy control


In order to guarantee the supply, the National Reserve Cotton Management Company has started the auction for 2021 on October 8. According to the latest one-week reserve cotton release data recently disclosed by the Cotton Association, a total of 436,000 tons of reserve cotton has been put in, and the transaction volume is 247,000 tons. The rate is 56.52%, of which: Xinjiang cotton transaction volume is 123,000 tons, real estate cotton is 124,000 tons; the average transaction price is 18,749 yuan/ton. Starting from November 1st, the calculation method of the reserve cotton sales reserve price of China Real Estate Cotton in 2021 has been adjusted to be linked to the cotton spot price in the international market, that is: reserve cotton sales reserve price this week (standard grade 3128B) = last week’s international The arithmetic average of the market cotton spot price index, and the calculation method of the reserve price of the remaining reserve cotton remains unchanged. According to the latest calculation method, in the fifth week (November 1-5), the reserve price of real estate reserve cotton is 18666 yuan/ton (standard grade 3128B), and the remaining reserve cotton sales price is 20346 yuan/ton (standard grade 3128B).


To sum up, the strong cotton price is well-founded, but due to the unclear status of the supply chain and the current macro policy regulation, in a sense, it has a certain suppressing effect on the cotton market.

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