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China:Influenced by the rise of cotton futures price |
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2005-3-29
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At the end of 2004, when the spot price of cotton hovered at around 10500 Yuan per ton, the market was really depressed. Factors such as rise in production, purchasing fund strain and farmers reluctance to sell have led cotton futures ascending from bottoms. As time goes by, the cotton price gradually formed a round of bullish market and after two and half months, the mainstream contract represented by the cf0505 has been pulled up for near 2000 points to the high of approaching 14300 Yuan/ ton today.
Cotton was replaced by grain due to falling cotton prices according to the data provided by Zhengzhou Commodity Exchanges for many regions, this year. Cotton yielding regions in Hebei, Henan, Jiangsu and Xinjinag witnessed a clear drop in the output. And cotton planting area in Shandong province contracted by 15 to 20 percent, too.
Market analysts hold that for a short while the cotton price will continue to rise, but with rather limited ascending room and duration. And the reasons are as following: firstly, in March, with the approach of spring ploughing period, the influence brought about by anticipated drop of planting area will be diminished; secondly, the pressure brought about by the production increase in 2004 will restrict the extent of the cotton price rise; and thirdly, the short-term supply-demand conflict in domestic China will be eased with the release of import quota. What''s more, the import speed of enterprises and the state''s import policy will directly influence the extent.
Industry insiders hold that the great decrease of cotton-planting areas in the country will result in such grave sequel as great fluctuation of cotton price, reduction of cotton growers'' income, re-occurrence of the mass import of cotton, increase of the cost of textile enterprises as well as jeopardizing China''s advantage in textile product and garment export.
According to the plant intent survey result released by the US National Cotton Council (NCC) in its 66th annual session held on Jan.31, 2005, this year the area of cotton-planting fields will grow around 1 percent over last year in the US. As revealed by a chief of US cotton consultation company during his recent survey of the operation condition of the cotton futures in Zhengzhou, American cotton import& export merchants and many cotton growing farmers very concern about the price trend of the China''s cotton futures market. This year''s increase of cotton-planting area in the US confirmed that the American farmers availed themselves of the price signal of the Zhengzhou''s cotton futures.
If cotton-sowing area in China drops this year, a surge of cotton price will take place at the end the year. The cotton seed price in Zhengzhou cotton price futures market is rising high now, and peasants are to gain much more from growing cotton than other crops. And this is the major reason why the cotton planting area keeps growing in the US, the world''s largest cotton exporter, even when its consumption amount has dropt for years in a row in China and the cotton price remains low.
Therefore, experts in the trade pointed out that at present a problem urgently need to be solved is that the price information in the Zhengzhou cotton futures has yet to be effectively passed on to China''s populous cotton growers. At present, the price information in the Zhengzhou futures market has not been effectively transmitted to China''s mass cotton-planting peasants on one hand, and on the other hand, textile enterprises thought the price should be bring down as it is too high now. If this situation continues to exist, peasants'' income will be reduced because of their failure to grow more cottons and textile enterprises will once again fall under the impact of market risks brought about by the surge of cotton price, which will incur new loses. |
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| China Economic Net |
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