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Recently, in the absence of significant changes in market supply and demand, cotton prices have fluctuate more violently, the transaction rate of reserve cotton has increased, and the market has become tense. The China Cotton Association has investigated and communicated with related departments. At present, China has sufficient reserve stocks to ensure demand for rotation, and it can also increase market supply by issuing additional cotton import quotas and other measures. There is no shortage of supply quantity.
First, this year's cotton production is expected to remain stable. According to a survey conducted by various parties concerned, the area of cotton planted in China remained basically stable in 2018, of which Xinjiang also continued to increase. Since the planting, the local cotton area suffered from meteorological disasters, but there was no significant difference from previous years, and the occurrence time was relatively early. The impact on the overall yield was limited. As of the end of May, rebroadcasting has been completed, the trend has stabilized, and the emergence rate is better than the same period of last year. If the weather conditions in the later period are normal, and measures such as field management are actively taken to increase fertilizer and other inputs, it is still expected to achieve a good harvest.
The second is the market's cash supply is sufficient. Last year, a total of 3.22 million tons of reserve cotton was traded, and some textile companies still have some unused reserves. As of June 1 this year, reserve cotton has traded 1.12 million tons, and it is currently guaranteed a daily delivery of 30,000 tons. In 2017, the country’s cotton production increased significantly, and the China Cotton Association’s statistical production was 6.05 million tons, a year-on-year increase of 22.5%. Due to the slow sales in the previous period, the cash inventory is still relatively abundant. As of the end of April, the total commercial inventory in the country was approximately 2.87 million. Ton, an increase of 1 million tons year-on-year.
Third, the effective supply of cotton textile enterprises increased. On June 2nd, the National Cotton Exchange Market and China Cotton Storage Corporation issued an announcement. Since June 4th, the reserve cotton turn-out transaction was limited to the participation of cotton textile enterprises, and it was for the sole use of the enterprise and could not be resold. According to the relevant departments, the main purpose of adjusting the object of reserve cotton purchases is to curb non-productive irrational demand, increase the effective supply to cotton textile enterprises, and ensure their cotton demand and normal production.
The fourth is to increase the quota of imported cotton to further meet market needs. With the gradual decline in the number of reserve cotton, the relevant departments have made plans in advance at the beginning of the year. Once there is a demand or a large fluctuation in the market, the number of imported cotton can be increased at any time. In view of the current market situation, according to the relevant departments, in the near future, a certain number of cotton import sliding tariff quotas will be issued to cotton textile enterprises.
Fifth, there is no limit to reserve cotton. Relevant departments have made it clear that there is no upper limit for the total volume of reserve cotton this year. As long as cotton textile companies have demand, the turnaround time can be extended to the end of September. The China National Fiber Corporation and China National Storage Cotton Corporation have already made relevant preparations in advance. At present, they are speeding up the progress of inspections by optimizing inspection procedures and changing sampling methods to ensure that the number of daily listings reaches 30,000 tons.
Since the beginning of this year, the production and sales of textile companies have been improving steadily, but they are also recovering growth. The increase in demand for cotton is limited. The supply of cotton is basically sufficient, and the abnormal fluctuations in the current market are influenced by speculation and other factors. The China Cotton Association reminds cotton-affected enterprises that the government has clear control objectives and strong control measures. Enterprises should pay close attention to policy dynamics, analyze the market situation calmly, operate rationally, and guard against speculation risks. At the same time, it is recommended that relevant departments strengthen the supervision of the futures market and prevent such acts as speculation from adversely affecting the healthy development of the cotton industry.