On December 18th and 19th, the purchase prices for cotton in several key regions such as Yunzhou, Wuxi, and Zaoqiang saw a gradual increase. For 37%-38% grade cotton, the price rose to 6.20-6.30 yuan/kg, while 14-16% moisture content grade IV seed cotton reached similar levels. The purchase price for left and right garment cotton exceeded 6.40 yuan/kg, and 34-35% cottonseed was priced around 6.0-6.15 yuan/kg. According to major 400-type processing plants, the main grades of lint cotton processed in the 2010/11 season were grades 4 and 5. Despite a significant price increase from 5.20-5.30 yuan/kg to over 6.20 yuan/kg in mid-December, the quality of seed cotton continued to decline. Currently, most of the lint being processed is of lower grades, with warehouse receipts becoming increasingly difficult to generate. On the 19th, one 400-type plant only acquired 2-3 jin of seed cotton. Additionally, the processing cost for grade 4 and 5 cotton in Quzhou climbed to over 28,000 yuan/ton, while the local sales price for grade 4 cotton remained at 27,200-27,600 yuan/ton. This sharp discrepancy between cost and sales price has made it hard for mills to operate profitably. As a result, many cotton companies are choosing to sell but not actually acquire more cotton. Although cash flow pressures on cotton production have increased, this year’s acquisition and processing volume has dropped by at least 30% compared to the same period last year. Most 400-type factories are planning to hold onto their current stocks until February and March, believing that the situation will stabilize. However, challenges remain, especially in areas like Hengshui, where some processing companies are not disclosing their lint prices publicly. Despite the market starting to show slight activity, with increased inquiries and small-scale transactions, the overall demand remains weak. Cotton companies in surrounding areas of Hebei, Shandong, and Henan are facing rising cash flow pressures due to loan repayments, employee bonuses, and operational costs. As a result, many mills are relying on existing inventory rather than making new purchases. On the other hand, downstream textile mills in Guangdong, Jiangsu, and Zhejiang have seen a sharp rise in factory cutbacks and shutdowns, with some manufacturers already planning to leave early. Given the uncertain demand outlook, most cotton mills are adopting strategies such as reducing cotton yarn stocks, increasing the use of polyester staple fiber, or even taking early leave. In 2010, the support from the Agricultural Bank of Hengshui for seed cotton acquisitions significantly declined, with some counties even halting the program. With the majority of lint cotton currently being grades 4 and 5, large-scale processing plants have slowed down their acquisitions, waiting for better market sentiment. Additionally, farmers in Hengshui tend to keep their cotton for holidays, giving an advantage to smaller 200-type plants in the later stages. According to reports, the number of warehouse pledges in several warehouses in Hengshui this year has decreased compared to previous years. This is partly due to commercial banks becoming more cautious about supporting cotton businesses, and also because many cotton enterprises are processing only limited quantities of seed cotton. The combination of commodity cotton and electronic trading has also faced challenges, with some contracts failing to meet delivery requirements.

Africa Sarong

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