Analysis Of Factors Affecting National Cotton Market Change

Since the May, on the one hand, the situation of the textile production is poor, the enterprise reduced raw material inventory, the purchasing of cotton are less active, the state continued to raise deposit reserve ratio; on the other hand, cotton imports declined in recent months, the supply of cotton reduced. On the whole, bearish factors still prevail. It is expected that the cotton price will remain weak but relatively stable.

1. Global and China the stock consumption ratio of the world and China are at historically low levels. In May, the U.S. Department of Agriculture (USDA) forecasts that the stock consumption ratio of the world will be 36.5%, the lowest record since 1993/94. National Cotton Market Monitoring System Sales forecast that 2010/11 the stock consumption ratio of China will be 20%, a low level in recent years.

2. Cotton imports declined and the supply of high-grade cotton is reduced. According to Customs statistics, in April China imported 210,400 tons of cotton, 66,000 tons less than last month, a decrease of 23.88%; 113,500 less than the same period of the previous year, a decrease of 35.05%. U.S. cotton export report shows that, in April, China has canceled the contract with the United States of 33,800 tons of imported cotton.

3. Hubei, Hunan and Jiangxi had drought which affected the growth of cotton.

4. The sales of yarn improved from the previous month. National Cotton Market Monitoring System on the market dynamics monitoring shows that cotton price is stabilized, the inquiry and sales of downstream yarn have increased.
The situation of textile production remains poor. In April, large-scale textile sector grew by 5.9%. The growth rate slowed 5.3 percentage points than a year earlier, slower 0.7percentage points than in March of 2011. Since the September of 2010, the growth rate of the textile industrial added value continues to decline. China's cotton output in April fell 6.8%; yarn production increased by 7.1% compared with the same period of the previous year.

Enterprises' activity of procurement of raw materials of textile is low. National Cotton Market Monitoring System for the latest release of "China's cotton industry inventory report" shows that early in May the enterprises who are ready for the procurement of raw materials accounted for 46%, reduced by 14 percentage points; those enterprises who do not intend to purchase cotton accounted for 14%. While in the early April no enterprises who did not intend to purchase the cotton.

The weather of cotton sowing areas and real conditions will also have an important impact on the market.