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China's cotton is in an emergency
Since October last year, domestic cotton prices in China have surged to a record high since 2003. Over the past three years, as the prices of staple crops like wheat, corn, and rice steadily increased, the area dedicated to cotton cultivation has been shrinking. In just two years, the national cotton planting area decreased by approximately 14 million mu.
Faced with soaring cotton prices and declining output, the 11,773 spinning companies across China are once again bracing for what could be another intense "cottage battle" this year. The price of cotton hit an all-time high, prompting the Chinese government to release its state reserve cotton into the market on August 10. A total of 600,000 tons were made available, but the impact on stabilizing prices was limited. The reserve price was set at 16,500 yuan per ton, yet most transactions occurred above 18,200 yuan, indicating strong demand that outpaced the supply.
Market analysts noted that the quantity of reserve cotton released was insufficient to meet market needs, as it only covered about a month’s demand. This limited the effectiveness of the intervention, and the price of cotton continued to rise despite the release. Many cotton spinning companies admitted they had failed to accurately predict the price trend this year. Some even resorted to transporting cotton from Xinjiang by truck, highlighting the desperation in securing raw materials.
Domestic cotton prices started around 10,000 yuan per ton in early 2009 and climbed steadily, reaching 14,833 yuan per ton by the end of last year. By June 30 this year, the spot price of 328 cotton had soared to 18,309 yuan per ton—up 42.6% compared to the same period last year and 83.1% compared to the start of last year. The upward trend shows no sign of slowing down.
Historically, the highest cotton price was recorded in 2003, when prices rose from 11,000 to 18,000 yuan per ton. However, after reaching that peak, prices began to decline. The financial crisis led to a sharp drop in prices last year, but the market rebounded in the second half of 2010, rising to 17,000 yuan per ton by May 1st this year. Within just two months, prices increased by over 1,000 yuan, marking an unprecedented surge.
Industry experts described the current situation as “crazy.†A senior executive from a textile company in Hebei noted that both Xinjiang and local cotton prices have reached their highest levels in the past decade. Real estate grade 3 cotton, which was priced at 16,000 yuan per ton in early March, now stands at 18,500 yuan. Similarly, Xinjiang three-tier cotton rose from 16,500 to 19,200 yuan per ton during the same period.
While rising cotton prices pose challenges, many spinning companies are also seeing higher yarn prices. However, the real concern is whether they will be able to afford cotton in the future. Hunan’s largest textile group, Dongxin Group, recently faced a shortage of cotton stocks. As of July, the company had stockpiled over 10,000 tons, but still needed an additional 7,000 tons before the new harvest in October. The company is seeking support from authorities, including increased import quotas and transport subsidies to ease the pressure of moving cotton out of Xinjiang.
A textile company in Yueyang reported that the rising spot price of cotton has put immense pressure on operations. Many orders were signed at the beginning of the year, but with cotton prices climbing, product prices remain unchanged, leading to significant losses.
Chen Kun, general manager of Fujian Jiada Textile Co., Ltd., remarked that “this year, cotton supply is not something people can easily manage. Those who handle raw materials in enterprises are the elite, and most don’t understand how to buy cotton properly.â€
Global cotton supply and demand imbalances are driving the current price surge. According to the U.S. Department of Agriculture, global cotton production has lagged behind demand for 15 consecutive years. This year, the harvested area of cotton globally is at its lowest level in over 20 years. Meanwhile, major producers such as China and Pakistan have suffered severe floods, and India imposed an export ban on cotton. These factors have exacerbated the global supply crunch.
In southern China, several provinces experienced catastrophic floods over the past three months, destroying 9.2 million hectares of crops. Analysts predict a 5–10% reduction in China’s cotton production due to the floods. Pakistan, which has suffered even more severe damage, may see its cotton output fall by 30–40%, potentially turning it into a net importer in 2010.
The U.S. Department of Agriculture predicts that China’s cotton imports will rise by 14% to 1.25 million bales in 2011, while Pakistan’s imports will increase by 53%. Global cotton demand is expected to grow by 2.7% to 12.087 million bales. However, global cotton stocks fell by 4.1% to 45.61 million bales in 2010, meeting just 38% of demand—the lowest level since 1994.
China, the world’s largest cotton importer, is heavily dependent on U.S. cotton, which is also the third-largest producer. Since 1993, China’s cotton import demand has grown by 24%. U.S. cotton stocks reached a 14-year low in 2010, with only 3.1 million bales remaining as of July 31.
With global supply struggling to keep up with demand, international cotton prices are expected to continue rising. A Bloomberg survey predicts prices could reach a 15-year high of 94.9 cents per pound.
The recent rise in domestic cotton prices is closely tied to global supply and demand dynamics. While domestic floods have contributed, the long-term decline in China’s cotton production has worsened the supply-demand imbalance. From 1984 to 2009, the country’s cotton planting area dropped from 120 million mu to 75 million mu. National statistics show that cotton output fell from 7.6 million tons in 2007 to 6.4 million tons in 2009.
This decline has led to reduced planting areas in key regions like Henan, Shandong, and Xinjiang. In Dezhou, one of China’s major cotton-producing cities, the planting area has dropped from nearly 3 million mu to 2 million mu—a 13% decrease from the previous year.
Despite higher purchase prices, farmers’ enthusiasm for cotton remains low. Compared to food crops, cotton offers fewer subsidies and lower returns. With many young workers leaving rural areas for urban jobs, the labor-intensive nature of cotton farming has become less attractive.
Experts suggest that improving the comparative advantage of cotton farming is essential to revitalize the industry. Policy support, better access to information, and technological advancements in agriculture are key steps toward sustainable growth.
For the textile industry, the era of high cotton prices presents both challenges and opportunities. Industry leaders emphasize the need for innovation, efficiency, and industrial upgrading to reduce reliance on cotton and explore alternative fibers. The future of the sector lies in quality, technology, and value-added products rather than sheer scale.
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