It appears both the size and quality of the 2007 Xinjiang cotton crop will not meet expectations. Given the vast size of the province, it is always difficult to reach a consensus on the crop; however, this season as cotton picking expands, sentiments of lower yields are being supported by price behavior. Concern over cotton quality is another influencing factor on prices. It seems an early frost and cooler temperatures have impacted the grade of the crop, which has begun to affect seed cotton prices this week.

Last year´s record Xinjiang cotton crop that exceeded official estimates by unprecedented amounts was clearly illustrated in the behavior of prices. On October 24, 2006, the average inland warehouse price of T129 in the province was 12,700 yuan per ton or the equivalent of 72.90 U.S. cents per pound, representing an 867-yuan per ton discount to the landed-Eastern-mill price; however, local prices on the same date this season are substantially higher. The T129 inland Xinjiang warehouse price is 14,150 yuan per ton or the equivalent of 85.59 U.S. cents per pound. The discount to the landed-Eastern-mill price is only 375 yuan per ton, which does not even cover freight costs. This year, Xinjiang´s T 328 prices at inland points are actually at a premium to Eastern Chinese landed prices, with T328 prices at warehouses averaging 13,675 yuan per ton versus the Eastern mill price of 13,617 yuan.

This dramatic change in prices reflects the seriousness at which the market considers the cotton supply and probably more importantly, the quality situation.

Source: Globecot