Cotton Market: Domestic and International Difficult to Make Progress Together

Core Tip: Protecting the domestic cotton industry and maintaining the international competitiveness of textile companies have become a difficult contradiction. Some experts said that before the international cotton price rebounded, the country should not liberalize import quotas. This is the trade-off result of choosing the more important party compared to the long-term benefits.

It is reported that in 2011/12, the state issued a total of 2.5 million tons of cotton import quota. It is expected that the quota will not be issued again in the later period. According to industry insiders, before the market really improves, the country will still control the amount of quotas issued during the new cotton year, which will support domestic cotton prices to a certain extent.

Whether it is the above-mentioned import quota system or the country’s cotton purchase and storage price policy, it is to avoid a large influx of foreign cotton, causing an impact on the domestic cotton market, and thus playing a role in stabilizing domestic cotton prices. The starting point can be described as well-intentioned.

However, from the actual situation, with the recent sharp decline in international cotton prices, Zheng cotton market volume is also shrinking, showing the situation of lower volatility. At the same time, the textile industry is still looking forward to the country issuing more import quotas to keep costs high.

At present, domestic and foreign cotton prices are upside down, and the price difference is between 4,000 yuan and 5,000 yuan. Many cotton spinning companies do not have enough import quotas. If they choose to use domestic cotton as raw materials, the cost will be greatly increased, plus the increasing employment costs in recent years. The final result must be to reflect the additional costs to the goods to be exported. In the international market, the cost of raw materials for foreign trade products is low, and it is very difficult for China's export products to compete with them. This is also the reason why reporters found out that many small and medium-sized cotton spinning companies did not stop production during the interview.

Then imagine a situation where if the country liberalizes import quotas, many domestic companies will be able to get imported cotton at a low price and begin to enjoy production with great joy. Naturally, high-priced domestic cotton will be used by people, and domestic cotton prices will be reduced. This is a great injury to China's cotton industry. According to industry sources, even under the protection of the current national cotton price policy, due to the high cost of planting, the enthusiasm of farmers to grow cotton is not very high.

Protecting the domestic cotton industry and maintaining the international competitiveness of textile companies have become a difficult contradiction. Some experts said that before the international cotton price rebounded, the country should not liberalize import quotas. This is the trade-off result of choosing the more important party compared to the long-term benefits.

Founder ** cotton researcher Cai Pingxia said that the probability of a gradual narrowing of the spread between domestic and foreign cotton is greater. “But taking into account the slow global macroeconomic recovery, the loose pattern of cotton supply and demand will hardly change in the short term, and downstream consumption will be sluggish. It is unlikely that there will be a significant increase in the international cotton price in the latter period. There will be long-term inversion of cotton prices inside and outside the country.”

It seems that for a long period of time, the domestic cotton will also be a "bite that does not hurt her mother does not love."