Galaxy Futures: Chinese Gins Concerned about Cotton Seed Prices
During the 2011/12 marketing year, some merchants suffered financial losses not because of cotton, but because of cotton seed.
September 6, 2012
Some of China’s larger ginning mills began to purchase seed cotton in early September in Hubei cotton-producing areas including Jingzhou, Tianmen and Xianmen, according to Beijing-based Galaxy Futures. Seed cotton (38%-39% lint percentage and a 13% moisture content) is currently selling at 60 cents/lb or 61 cents/lb, and gins are refusing to buy seed cotton if it has a moisture content of greater than 15% because they are concerned that the government might get stricter about cotton quality in its reserve buying program.
Some merchants believe that both the quality and quantity of crop may be lower than they were last season. However, it’s expected that the purchasing price of seed cotton (with a lint percentage higher than 38%) will not drop below 60 cents/lb until the end of October because farmers have high expectations about the price they will be able to get.
On September 5, cotton seed is sold at 16.4 cents/lb to 16.5 cents/lb, but that is not a representative price because most gins have not started large-scale purchasing yet. Ginners say it takes about a month between purchasing their seed cotton to selling the ginned lint to the China National Reserves Corporation, and the cost for ginning mills will increase quickly if the price for cotton seed drops during that period. In fact, during the 2011/12 marketing year, some merchants suffered losses not because of cotton, but because of cotton seed.