Cotton Update FH April: Part 1

The state reserve’s purchase of cotton has now come to an end with the third installment completing the allotted 1.5 million tons. To date, the state reserve has purchased more than 2.7 million tons of cotton, just about equaling forty percent of 2008/09’s total output. The cumulative effect of these purchases has helped push seed cotton prices higher so much that farmers are now considering planting slightly more cotton than originally anticipated.

Second, as merchants rushed to buy tenderable lint cotton around the country to deliver to the reserves higher quality grades became harder and harder to find. In turn, the absence of high grades from the market has seen a rapid run up in lint prices around the country. This is probably best illustrated by China’s top spinner, Weiqiao, which has raised procurement prices for all grades by more than 700 yuan/ton since late March. At the same time, the ZCE and CNCE E-Forward Market have rebounded as well with sharp price increases the past couple of weeks.