In recent years, China’s ginning capacity has risen fast, especially in 2020. The newly-added ginning capacity this year is due to delayed construction last year affected by the epidemic. Ginners may have higher enthusiasm to procure seed cotton this year as they have gained good profits last year, says a CCF Group report.
In addition to the expectations over high new seed cotton prices, market players also have certain expectations over the coming traditional buoyant season. Currently, cotton yarn inventory remains low as downstream traders and some end-users replenish stocks in advance. In short, Chinese cotton prices may continue rising amid the good fundamentals.
In the 2021-22 season, cotton planting areas in Xinjiang are expected to reduce slightly. Bad weather impacted the new cotton crop growing somewhat. In addition, cotton planting costs increased this year due to higher rents, fertilizer and water prices and the ginning capacity in Xinjiang continues to rise. Therefore, market players expect higher seed cotton prices in the 2021-22 season. The strong rise in cotton futures in July is mainly attributed to expectations over the high new seed cotton prices and the coming traditional buoyant season. The Central Bank of China cut the reserve requirement ratio by 50 basis points for all banks, effective from July 15, which brought a certain positive mood to the market.