Category: News

National Food and Strategic Reserves Administration and Ministry of Finance jointly announced just now. In order to optimize the structure of reserve cotton, ensure the quality and enhance the regulation and control ability of central government. It’s decided that some reserve cotton will be rotated in 2020. The relevant matters are hereby announced as follows:

Reserve dump:

Time: reserve auction will be carried out on each business day from July 1, 2020 to September 30, 2020.

-Quantity: The total amount is about 500,000 tons, with about 8,000 tons offered on each business day.

• Price. The starting price will be determined dynamically according to the market. It is calculated and determined by domestic cotton spot price indexes and international spot index (cotlook A) according to the weight of 50% respectively, and will be adjusted once a week. During the period of reserve auction, when the domestic market cotton spot price index is lower than 11,500 yuan / ton, auction will be suspended from the next business day; when the domestic market cotton spot price index exceeds 11,500 yuan / ton for three consecutive business days, auction will be restarted on the next business day.
• Platform. Reserve cotton will be offered and bid through CNCE e-trading platform. sold in the national open market.
• Classing. The quality and weight of the reserved cotton will be inspected by China Fiber Inspection Bureau(CFIB).

Calculation Formula of Reserve Dump:

-Weekly starting price – domestic cotton price indexes of last week X 50% + international spot cotton price index X 50%

• Domestic cotton price indexes = (CCI + CN cotton B) ÷ 2
• International cotton price index = cotlook A (usd/ton) × exchange rate × （1+ import cotton tariff 1%）× （1+ VAT 9%）
  1.  (exchange rate = the rate on the third Wednesday of last month)  

• CCA (China Cotton Association Q’s quality P&D will be used for auction.

Reserve Buying:

-Related department shall select another time to arrange the reserve buying, according tot he actual reserve selling and the supply/demand situation of the cotton market. The specific details will be announced separately as soon as possible.

As of the end of May 2020, China has only purchased 19% of the $170 billion worth of U.S. goods that would agreed upon in the Phase One Trade Agreement. This means that in order for China to uphold their end of the deal, they will need to purchase approximately $139 billion worth of goods by the end of the year.

On Tuesday, USDA will report the annual Acreage report and the seasonal Grain Stocks report. Reuters/Bloomberg have provided their expectations for both reports. They estimate that there will be approximately 13.2 million acres of cotton planted, but the estimate may range from 11.9 to 13.9 million acres.

The U.S. House of Representatives will likely pass a $1.5 trillion infrastructure bill. The picture below demonstrates how money would be allocated through The Moving Forward Act.

On June 25, the Commodity Futures Trading Commission (CFTC) held an open meeting. The link below provides the key takeaways from the meeting.

Click Here

USDA/AMS announced today that beginning July 1, 2020, modifications will be made to the cotton and tobacco policy regarding Review and Rework for classifications originally designated with plastic extraneous matter. Three modifications were made. See link for details.

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In August, China imported 651,522 bales (141,852 MT) of cotton, representing a decrease of 4% m/m, and an increase of 54% y/y.  Imports from U.S. included 470,857 bales (102,517 MT), representing an increase of 5% m/m, and an increase of 543% y/y, accounted for 72% of the total. In 2020, Chinese cotton imports totaled 5,458,448 bales (1,188,437 MT) with a decrease of 17% y/y. U.S. cotton was ranked as the largest supplier with a total 2,266,329 bales (493,435 MT), accounting for 42% of total imports. The report (below) also provides information on other topics such as textile and apparel exports, the tensions between U.S. and China, and more.

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This week, the National Cotton Council released their recommendations for COVID-19 assistance. In the document, NCC discusses the economic devastation that COVID-19 has had on the cotton industry, including details regarding cancellations in export sales and decrease in world consumption. NCC provided 3 recommendations that would support the segments of the cotton industry. The recommendations can be found using the link below.

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This week, Mr. Sun Ruizhe, President of China National Textile and Apparel Council (CNTAC), wrote a letter to ACSA to discuss actions they are willing to take to promote contract performance from Chinese companies. The letter from CNTAC is provided below.

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ACSA has been in communication with the China Cotton Association (CCA) regarding trade between United States and China. This week CCA provided ACSA with the latest on the Chinese cotton industry. WANG Jianhong, Vice President and Secretary General, also wrote ACSA a letter thanking us for our latest discussions regarding the United States and China’s cotton industry.

Click Here for CCA letter

Click Here for translated CCA letter

Click Here for Chinese cotton industry information