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Friday, February 23, 2024

Sharp fluctuation in rates prompts Chinese ginners to reduce seed cotton prices

Feedback from cotton farmers has indicated that cotton ginners have lowered their seed cotton purchase prices in the current cotton season due to the sharp fluctuation and decline in Chinese cotton rates since mid-October and also amid rising imports of cotton yarn.

On October 18 and 19, the purchase and listing price of machine-picked seed cotton with 40 percent impurity and less than 13 percent moisture content in Xinjiang dropped to Yuan 7.40-7.60 per kg, while seed cotton with less than 12 percent moisture content was quoted at Yuan 8.60-8.80 per kg.

As the average daily transaction price of spot futures, reserve cotton, and seed cotton purchase prices decline, farmers are increasingly reluctant to sell. As of now, a large quantity of harvested seed cotton has been hoarded by cotton farmers.

Cotton processing companies have also become more cautious in purchasing and are ensuring strict inspection of the seed cotton for high impurities as well as low grade cotton. They are also rejecting seed cotton if the moisture rate exceeds 13 percent.

Cotton companies are worried that if the main contract price of cotton falls sharply, it will also impact the current price of cotton futures and may reach Yuan 2,000 per ton or even slip to as low as Yuan 1,500 per ton.

These cotton companies fear that there will be no hedging or hedging tools available for cotton of the new season. They are also worried about Chinese imports of cotton yarn increasing since the middle of the year, particularly from India.

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