The textile industry chain's bearing capacity gradually weakened - the unease in cotton prices rises

On October 15, China's cotton price index (CC Index 328) increased by 254 to 24177. The previous day, the first four contracts of the US Intercontinental Exchange (ICE) cotton closed at the daily limit, and the December contract closed at 114.87 cents/lb, up 400 points, a record high. Cotton prices surged before the US Department of Agriculture announced the market’s eagerly anticipated monthly supply and demand report, and the market continued to surge after the release of the data.

U.S. Department of Agriculture Reduces 2010/11 Cotton Production Forecast for China, the World's Largest Cotton Consumer, by 1 Million to 31.5 Million Bales, and Raise China Import Estimate from 12.75 Million to 13 Million Bales, China's Ending Stock Forecast From 16.01 million Bags to 14.72 million bags.

Driven by the contradiction between supply and demand and the international cotton market, domestic cotton prices have risen rapidly, which has caused pressure on cotton spinning companies that account for more than 60% of the cost of cotton.

"The cotton industry has a long chain and it is related to all aspects of the national economy and people's livelihood. Once demand exceeds supply, it will rely heavily on imports as much as soybeans. The impact on the entire textile and apparel industry in China will be very large," said Li Weizhong, deputy director of the Cotton Research Center of Shandong Academy of Agricultural Sciences. .

In recent years, the price of cotton has been fluctuating a lot. This year, the price of cotton has reached a record high, making the market's call for strengthening the country's macro tone.

Behind the continuous price increase, "supply is the main reason for the current cotton price increase," said Xu Xiaoqing, deputy minister of the rural economic research department of the Development Research Center of the State Council.

In the first half of 2010, due to the weakening of the financial crisis, China's textile and garment industry exports resumed, and demand for cotton soared. Data from the Ministry of Agriculture showed that from January to June, textile and apparel exports were 88.8 billion U.S. dollars, an increase of 22% year-on-year.

However, the impact of the financial crisis in 2008 led to a sluggish export market for cotton textile products. The cotton price was in the doldrums, and the enthusiasm of cotton farmers for cotton cultivation was frustrated. In 2009, the cotton planting area in China decreased by 12.4 million mu.

China's total cotton output in 2009 was 6.37 million tons, which was a decrease of 1.12 million tons from 2008. In the year when cotton production was normal, the cotton gap was about 4 million tons. The 2009 production cuts led to a further increase in the cotton gap this year.

At the same time, in August this year, the rainfall in the Yellow River Basin was relatively high, which was extremely detrimental to the growth of cotton that was in the bud stage, resulting in a reduction in cotton yield and a decline in quality. Li Yuzhong predicted that the total cotton output this year would fall by 20% to 30%.

National Bureau of Statistics data show that in 2009 the cotton spinning raw material supply and demand difference of 2.69 million tons, and a difference of 6.26 million tons in 2010, 3.57 million tons more than last year, the cotton gap is obvious.

Internationally, the reduction of cotton production caused by floods in Pakistan, the sharp increase in import demand from China and Brazil, India’s restrictions on cotton exports, the continued depreciation of the US dollar, and the promotion of the international cotton market have all affected domestic cotton prices.

In order to ease the contradiction between the supply and demand of the cotton market, the Chinese government began dumping stocks on August 10. However, from the perspective of trends, the price of throwing stockpiles has risen to a low level, rebounded at the end of August and accelerated after mid-September.

Regarding the abnormal performance of the cotton market, Mao Changqing, an analyst with CITIC Securities (16.78, 0.25, 1.51%), said in an interview with the “Financial National Weekly” reporter that due to this year’s significant reduction in cotton production, the market’s expectations for future cotton prices will be even higher.

At present, major cotton producing areas such as Shandong and Xinjiang have begun to acquire new cotton one after another. The highest purchase price of seed cotton in some areas in Shandong exceeds 6 yuan/kg.

Will the new cotton market stabilize the current cotton price? Du Min of the Rural Economic Research Center of the Ministry of Agriculture told the reporter of the “Financial State Weekly” that the country’s reserve cotton stocks are limited. Under the expected production cuts, the demand for cotton remains strong and the market gap is large. The listing of new cotton plays a limited role in curbing cotton prices and will increase in the future. The price trend will continue to spread.

Newly shuffled cotton in the textile industry generally accounts for 60% to 70% of the cost of cotton textile companies. The rise in prices affects the downstream industries. Many small and medium-sized textile companies have stated that the increase in cotton prices has already made companies “overwhelmed”.

As far as the textile industry is concerned, the bearing capacity of each link is gradually weakening, and the price increase of cotton yarn, cotton cloth and cotton products has gradually decreased. When the production pressure is limited, the reduction of cotton consumption has emerged.

According to the person in charge of the Purchasing Department of Yantai North Home Textiles Co., Ltd., the increase in cotton prices has a great impact on the company's orders and exports. This year's cotton procurement is quite difficult.

For some strong textile companies, they can rely on a wealth of inventory to cope with the current pressure of price increases, or directly develop their own cotton planting bases. For small and medium-sized textile enterprises with tight funds, they can only choose to cut production or stop production.

Hebei Yudeyuan Textile Co., Ltd. is a small-scale textile company. The person in charge of the company stated that since the beginning of this year, in the face of pressures such as the appreciation of the renminbi and rising labor costs, the profit margin of the company has been very limited, and the current cotton price The rise has caused the company to be on the verge of life and death.

“We hope that the country can be tilted in terms of taxation policies and give businesses a living path,” said the person in charge.

The textile industry is China's traditional advantageous industry, with an annual export value of 5% of the country’s total foreign exchange earned through exports of goods, and the entire industry has more than 20 million employees. In this round of the international financial crisis, the textile industry has just entered the stage of recovery growth after undergoing such impacts as the appreciation of the renminbi and the downward adjustment of export tax rebates. However, it has to bear the brunt of cotton prices or even shortages.

In Du Min's view, the current increase in cotton prices indicates that textile companies still have some profit margins, and cotton prices are still within the range that the market can digest and accept.

For textile companies, efforts must be made in the research and development of new products, brand cultivation, etc., to transform traditional industries and increase the added value of products in order to truly grasp the bargaining power and initiative of the international market. "The rise in cotton prices will accelerate the restructuring and integration of the textile industry, and will promote the concentration of industries. A group of small and medium-sized enterprises will be eliminated. This is also the general trend of industrial adjustment." Du Min said.

The excessive increase of cotton prices by the controlling hand has caused the attention of the relevant national ministries and commissions.

On the morning of October 14, the National Development and Reform Commission held a joint meeting on macroeconomic control of cotton to analyze the situation and study measures to stabilize the cotton market. The relevant departments were required to follow their respective divisions of labor and joint efforts to rectify the market order, and severely crack down on acts of disrupting market order such as malicious speculation, and at the same time do Other control plans.

On September 27th, seven ministries and commissions including the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Agriculture jointly convened a nationwide cotton teleconference on the country's cotton work. They expressed that by properly adjusting reserves and effectively utilizing international market resources, the basic balance of cotton production will be maintained and the textile industry will be promoted. Change the mode of development and accelerate the structural adjustment and industrial upgrading of the textile industry.

However, since August, although the country has actively started dumping, but due to the contradiction between supply and demand in the cotton market, market price increases are expected to increase, cotton prices have steadily increased.

The National Development and Reform Commission price monitoring center stakeholders told the “Financial National Weekly” reporter that the spot price of cotton was driven by **, which is the most important pricing center for global cotton. The state should consider how to control the price changes in the international market, especially the market.

"China can only passively accept international price fluctuations. In the long run, this will be detrimental to the entire industry," said the source.

Li Duzhong believes that the state should adopt relevant policies to stabilize the cotton planting area and increase the total output from the long-term perspective. At the same time, through scientific and technological investment, it will increase the yield and protect the domestic cotton's self-sufficiency rate of not less than 70%, so that the entire country can be basically maintained. Textile industry safety.

India, a major producer of cotton, has established a minimum support price for cotton and has financed the cotton development project through the Indian Cotton Corporation; Pakistan has also established a cotton protection price; since 1994, Mexico has implemented a plan to prop up agriculture, and for cotton farmers who grow more than three years per hectare A subsidy of 73 U.S. dollars and plant protection subsidy of U.S. $129

American cotton farmers enjoy a subsidy of up to 89% provided by the U.S. government, that is, a U.S. government subsidy of US$89 per 100 U.S. dollars, which effectively guarantees the stable production of U.S. cotton. However, Chinese cotton farmers currently only enjoy a fine subsidy of 15 yuan per mu for the country. Relatively speaking, the foundation of China's cotton industry is extremely fragile.

In this regard, Du Min said that the instability of cotton prices is an important factor affecting the enthusiasm of farmers to plant cotton, the state should take the minimum protection of cotton prices measures, start at an appropriate time, so as to ensure the interests of growers.

"The state's macro-policy policy, whether from food and agricultural subsidies, comprehensive subsidies for agricultural resources, or agricultural insurance, including the construction of cotton bases, should further increase investment to increase overall production capacity," Du Min said.

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