Difficulties in the adjustment of cotton prices

On September 7, as the domestic cotton price continued to fall, the National Development and Reform Commission decided to activate the policy of temporary purchase and storage of cotton from the 8th onwards. The fixed price for storage and storage was 19,800 yuan per ton, and there was no limit on how much it would take. Unexpectedly, after the start of the cotton purchase and storage policy, it turned out to be zero transactions for a week.

At present, the price of the international cotton market has fallen below 17,000 yuan per ton. Faced with the gap between international and domestic cotton prices of 2,000 yuan to 3,000 yuan per ton, textile companies in difficult times and with meagre profits have a rather firm wait-and-see attitude.

The zero transaction for consecutive weeks made the state's cotton purchase and storage policy face a dilemma - after the farmers had tasted more than 30,000 yuan per ton, they were reluctant to sell. The psychological price of cotton farmers in the cotton producing areas is more than 9 yuan per kilogram of seed cotton purchase price, and more than 23,000 yuan per kilo of lint cotton. Cotton end-user cotton spinning companies, on the other hand, stated that they purchase cotton at a cost of 3,000 yuan per ton higher than the international market price. The product is not competitive and the company has no profit.

The appearance of this embarrassing phenomenon undoubtedly shows a trend: due to the country’s cotton purchase price, the market price of seed cotton spot has increased by about 500 yuan from 19,000 yuan per ton last month, and the policy has been introduced since the price of cotton. It was the role of stabilization. However, due to the impact of international cotton prices and the weakening demand for international textiles, the final price of cotton will suffer tremendous downward pressure. As textile companies expected, lint prices will oscillate around 20,000 yuan per ton next year. The introduction of the national cotton reserve acquisition policy has given the majority of cotton farmers confidence and assurance, that is to say, when the market price of cotton is selected to break down, the country will use huge amounts of money to subsidize cotton farmers.

If cotton purchasing and storage prices cannot be brought into line with the international market, the textile industry will be faced with a series of difficulties from capital, market, and cost. However, if the government does not issue a policy, the interests of cotton farmers will be damaged. In the future, the cotton planting area will also be reduced. The raw material crisis will be faced in the processing sector, and the dependence on cotton will increase. This is probably the key to the dilemma.