March 7, 2012

China's spot cotton prices hike firmly

In the week ending February 24, China's spot cotton prices remained rising powered by high hopes for the next crop year's cotton stockpiling policy, the China Cotton Association said in a weekly report on February 28.

However, the futures prices kept falling to further narrow the spread with the spot prices.

China is about to release the minimum purchase price of cotton for the crop year of 2012-13. Processing mills generally predicted that the protective price would increase over the preceding crop year and thus were active in unginned cotton procurement.

The national cotton price index CCIndex 328, which indicates the average price of standard lint in China, accumulatively increased by RMB70/tonne (US$11.09) to RMB19,623/tonne (US$3,108.59) last week. However, the most actively traded September cotton contract on the Zhengzhou Commodity Exchange fell 0.85% to close at RMB21,520/tonne (US$3,409.11).

The state stockpiler China National Cotton Reserves Corp. purchased 72,990 tonnes of cotton last week, compared with 49,720 tonnes a week earlier.

China began the cotton stockpiling program on September 8, 2011 after market prices fell below the protective price of RMB19,800/tonne (US$3,136.63) for five straight working days and had totally bought 2.64 million tonnes for reserves by February 24.

Weighed down by worries over cotton demand, the international cotton prices displayed a downward trend last week, and were RMB2,781-3,265/tonne (US$440.55-$517.23) lower than the domestic prices, according to the report.