New cotton on the market to beware of "difficult to sell cotton"

New COTTON WILL be on the market in September. Under the situation of economic growth decline at home and abroad and increasing uncertainty in international trade environment, the demand for cotton will fall, which may cause the phenomenon of "difficult to sell cotton" and damage the interests of cotton farmers. It is necessary to make a good overall plan as soon as possible to ensure the stable development of our cotton industry.

Market expectations turned weaker

Cotton sales are slow

On the demand side, since February this year, frequent outbreaks of COVID-19 in China have caused a great impact on social operation and economic life. The supply chain of the cotton industry has been stuck and blocked, and the downward pressure of the domestic market has increased significantly. According to the National Bureau of Statistics, from January to May 2022, the retail sales of clothing, shoes, hats, knitwear and textile products of units above designated size decreased by 8.1% year on year, and the online retail sales of clothing products decreased by 1.6% year on year. Demand for cotton has been weakened by a decline in end-use consumer goods. In the late outlook, the Federal Reserve continues to raise interest rates to curb inflation, the global economy is increasingly expected to enter a recession, and overseas textile and garment exports are facing many risks and challenges. Affected by the overall macroeconomic and trade environment, domestic cotton consumption exists to reduce pressure.

On the supply side, according to the National Cotton Market monitoring system monitoring, as of June 30, the country's cumulative processing of lint 5.801 million tons. Adding in imports and previous year's stocks, cotton supply exceeded 10 million tons in 2021/2022. Since 2022, China's cotton market has changed the pattern of supply and marketing in the previous year. The cotton market is weak, consumption continues to be depressed, and cotton sales progress is slow. On July 13 this year, the country began to start the rotation of cotton reserves into the plan, considering the size of state storage and storage, 2021/2022 year is still about 800,000 tons of cotton into the next year.

The cost of cotton planting has increased

New cotton price or not optimistic

In 2021, domestic fertilizer prices showed a general increase. According to research, this year cotton agricultural cost input rose about 50%, about 300 yuan per mu. The land transfer fee is 800-1200 yuan per mu, an increase of 200-300 yuan over last year. The cost of picking cotton will also rise later due to higher oil prices. Overall estimate this year cotton production cost per mu compared with last year at least increased by 500-600 yuan, or about 20%.

Under the influence of the supply and demand situation, from January to July 2022, the average monthly price of domestic standard grade cotton 3128B cotton dropped from 22,530 yuan to 17,366 yuan per ton, a decrease of 22.9 percent. At present, the spot price of 3128B grade cotton has fallen to 16,000 yuan per ton, and the main contract settlement price of Zheng cotton futures is 14,780 yuan per ton. Looking from the production, because last year cotton price is better, farmer cotton planting enthusiasm is higher, this year our cotton area is stable in slightly increased. According to the National cotton production monitoring by the Research Office of Industrial Economics of the National modern cotton industry technology system, the country's cotton sown area increased by 1.6% year-on-year in 2022. As of now, comprehensive meteorological conditions in cotton areas are suitable, mild occurrence of pests and diseases, and cotton growth is generally good. It is expected that new cotton output will be expected to exceed last year. In the current cotton supply is sufficient, demand is difficult to improve, cotton prices continue to fall under the situation, the new cotton price may not be optimistic.

Advised to plan early

Ensure reasonable income for cotton farmers

Considering this year cotton planting cost increases substantially, cotton processing enterprises are generally nervous capital, the New Year is likely to appear "difficult to sell cotton" phenomenon. It is suggested to plan as early as possible to ensure reasonable income for cotton farmers.

First, advance the formulation of new cotton purchase and storage plan, give full play to the state storage of the domestic market regulation role. In view of the possible decline in cotton consumption this year, difficult to sell cotton and other phenomena, it is suggested that the relevant departments consider as a whole, formulate the new annual cotton purchase and storage plan in advance, start the national cotton purchase and storage when necessary, balance the domestic cotton supply and demand, and stabilize the domestic cotton market and production.

Second, the careful arrangement of the next annual cotton sliding quasi tax quota. In order to stabilize the domestic cotton price, it is necessary to consider comprehensively according to the domestic cotton supply and demand situation and trade situation in the New Year. On the one hand, it is necessary to ensure that the foreign cotton demand of export enterprises is met, and on the other hand, it is necessary to avoid the impact of foreign cotton on domestic cotton consumption. Therefore, it is necessary to carefully determine the timing, scale and import structure of cotton sliding tax.

Third, strengthen the support of downstream textile enterprises. We will strictly implement the policy of stabilizing foreign trade and foreign investment promulgated by the state in April, effectively reduce the burden of enterprise income tax, social security, water and electricity for domestic textile enterprises that are struggling to operate, and provide preferential loans to them to guide the expected recovery of the domestic cotton consumption market and maintain the health and stability of the cotton market. (The author's unit is the Rural Economy Research Center of the Ministry of Agriculture and Rural Affairs)