Crazy Cotton Prices
Crazy cotton prices, crazy cotton - why are they so volatile? And how long will this volatility continue?
Recently, a fast reporter visited Sheyang, once a county that had won the national cotton production championship for 11 consecutive years. Following the cotton planting, procurement, and processing industry chain, we sought out the "footsteps" of the cotton price fluctuations...
Cotton Farmer No. 1
Cotton-Garlic Intercropping: Garlic is fierce, Cotton is wild
The main planting feature of Group 1 in Lianhe Village, Qianqiu Town, is intercropping cotton with garlic. Villager Cai Lirong introduced that although intercropping garlic yields objective profits, it also has relatively high costs, mainly due to high seed costs which require significant upfront investment, as well as more labor hours. At the field's edge, he tied a bag of raw cotton onto his motorcycle. Cai Lirong works in Qianqiu Town, and the specific task of picking cotton is handled by his wife. "I come over when I have time to help my wife bring the cotton home!"
Wang Naixiang's cotton field is also an intercropped cotton-garlic plot, with a row of garlic planted beside each row of cotton.
Wang Naixiang sold his first batch of cotton half a month ago, at which point the cotton price had already started to rise. "The first sale was at 5 yuan and 6 jiao; now it's at 5 yuan and 8 jiao," he said, adding that he never expected it to go this high. When he calculated the price during sowing around Qingming Festival, he estimated it would be around 4 yuan. Like everyone else's opinion, with fewer areas being planted this year, he believed the price would go up.
"It's not enough." Wang Naixiang said, "Unlike you city people, we don't need to buy vegetables, grains, or eggs. With 25,000 yuan, it's not enough."
Wang Naixiang's family consists of three people. His daughter studied maritime service and started working on a cruise ship in Dalian after the Spring Festival. Currently, she works part-time in a Shanghai electronics company. Wang Naixiang said that his daughter is very filial; out of her monthly salary of 2000 yuan, she sends half back home.
"Not enough," he repeated again.
Cotton Broker
Low yield, astonishingly high prices, primarily selling to small processing plants
Big enterprises think my raw cotton is inferior
Cotton is an important crop closely related to people's lives.
The core axis of the cotton industry chain from upstream to downstream is: quality seed breeding - cotton planting - cotton harvesting - cotton procurement - initial cotton processing - storage - textile spinning - clothing manufacturing - wholesale and retail of clothing - clothing consumption.
While riding through some towns, the fast reporter noticed various-sized cotton warehouses visible in the small towns. Prominent signs reading "cotton procurement" were displayed at the warehouse entrances. During interviews with cotton farmers, it was learned that the cotton farmers mainly sell their cotton to brokers who come to their doorsteps.
"They usually drive their electric tricycles right to the cotton farmers' homes," Ji Ronghua introduced. After some haggling, cash transactions take place. Most of these brokers are locals, some of whom even grow cotton themselves. They purchase raw cotton from the farmers and then resell it to cotton processing plants.
Around September 20th, Ding Zhen received his first batch of raw cotton, priced at about 4 yuan per unit, and later the price kept climbing due to excessive demand. The current price is around 5.8 yuan.
This year's yield is relatively low. Two years ago, Ding Zhen could handle 30,000 to 40,000 catties of cotton in one day; last year, it decreased, and this year it's even less, only around 3,000 to 4,000 catties daily. Ding Zhen said that the price is too high, and this year alone, the start-up capital required is 500,000 to 600,000 yuan, whereas last year, 300,000 yuan sufficed.
"Don't look at me running around all day; there's quite a bit of cotton and money going in and out, but this season, I'll only make about 30,000 to 40,000 yuan," Ding Zhen said. This warehouse, covering about 100 square meters, is rented, with a half-year rent of 5,000 yuan. "After the cotton is done, I'll switch to rice."
Ding Zhen mentioned that there are around 30 to 40 such scale procurement points just in Chenyang Town.
Sun Libing's procurement point is located diagonally across from Ding Zhen's. Unlike Ding Zhen, Sun Libing does not procure directly from cotton farmers but relies on several smaller-scale brokers who supply him with cotton after acquiring it from farmers. Compared to Ding Zhen, Sun Libing's profit margin is lower, but it also saves him the trouble of personally bargaining with farmers.
Cotton Goes Wild, But Ginning Factories Shut Down
During the interview with cotton broker Ding Zhen, the fast reporter learned that almost no large local ginning factories procure from them. According to Wang Jian, the office director of Shenzhou Jiulong Textile Co., Ltd., in previous years, the factory was filled with cotton brokers coming to supply goods. However, during the period of the interview, not a single broker entered "Jiulong Textiles." Even more surprisingly, Jiangsu Shuangshan Group, hailed as the flagship enterprise of Sheyang, had all five of its ginning enterprises in a state of shutdown.
Although cotton prices went wild, cotton farmers rejoiced, yet not everyone along the cotton industry chain benefited.
High Prices and Instability Drive Local Cotton Spinning Leaders to Seek Farther Afield
Lin Yongjun introduced that as a large cotton spinning enterprise mainly dealing in yarn and cotton fabric, Shuangshan Group requires 30,000 tons of lint cotton annually. Of this, 60% is imported, while 40% is purchased locally.
Shuangshan Group mainly imports from the United States, Brazil, and India. Contracts were signed in June, with the price set at 18,000 yuan per ton of lint cotton, which is relatively cheaper compared to current prices. One shipment has already arrived at the Qingdao Port. Local cotton mainly comes from Xinjiang, Shandong, Hebei, and local Sheyang.
As the person responsible for cotton procurement at Shuangshan Group, Lin Yongjun found this year's work particularly challenging. "Domestic cotton prices are too high. In previous years, our procurement volume in Sheyang was substantial. Back in 2003, we procured several ten thousand tons. This year, the price is too high; if we procure from cotton brokers, it has already reached 6.1 yuan." Lin Yongjun explained that the reason why cotton prices in Sheyang are so high is twofold: one is the low yield leading to insufficient supply, and the other is the good quality of Sheyang cotton. Many brokers from Shandong and Hebei come to Sheyang for procurement. As a result, the price of raw cotton in Sheyang has also increased. "We consider cost. If the price is too high, the price of our spun yarn will also increase accordingly. If the price of yarn goes up, my clients, namely some garment factories, will also consider the cost, thereby affecting normal production."
Lin Yongjun expressed that they hope to purchase raw cotton from Sheyang, but unfortunately, the price is unsuitable.
"We have five ginning factories, capable of processing 20,000 tons of raw cotton without any problem, but there's no supply," Lin Yongjun introduced. Although Sheyang cotton is nearby, it cannot be transported into the ginning workshop. He revealed that currently, all five ginning factories under Shuangshan Group are in a state of shutdown awaiting production.
"But the situation is not optimistic; cotton prices are still rising. This year's cotton price is at a historical high."
Uneven Quality of Raw Cotton Forces High-Spinning Enterprises to Find Solutions
Similar to Shuangshan Group, Sheyang Shenzhou Jiulong Textile Co., Ltd., is also a comprehensive cotton spinning enterprise dealing in yarn, cotton fabric, and finished garments. They have relatively high requirements for cotton quality.
"The biggest concern for Jiulong Textiles is the quality of cotton," Office Director Wang Jian told the fast reporter. "Since we are a high-spinning enterprise producing high-precision products like silk quilts, we have particularly high demands on cotton." Wang Jian said that they began procurement in September, but due to the heavy rainfall this year, including in Sheyang, the moisture content of cotton is relatively high. Additionally, some brokers, in pursuit of maximum profit, mix good and bad raw cotton together, and some cotton hasn't been fully dried before being sent to the ginning factory. After processing such raw cotton into lint cotton, it's difficult to meet the required quality standards.
Cotton Farmer No. 2
Cotton Prices Fluctuate Daily, Making It Hard to Keep Track, Fortunately, They Are All Going Up
On a mid-July day, when the first cloud floated above his head, Chen Bijü didn't pay much attention. He didn't expect that the cloud would turn into drizzle and continue raining for more than 20 days. Chen Bijü's mind was thrown into chaos: the 50 mu of cotton fields he and his wife painstakingly cultivated were all soaked in water, and the first batch of cotton bolls had rotted from the rain. If the rain continued like this, then all the sweat he and his wife had poured since the Qingming Festival, for more than half a year, would be wasted.
Chen Bijü has insights into cotton cultivation, and in Sheyang, achieving such a high income solely from cotton farming is rare.
When talking about the rain in July and August, Chen Bijü occasionally recalls it with lingering fear, but the unexpectedly good price of cotton this year quickly makes him forget past troubles and smile broadly.
Or perhaps it's just the base price of cotton this year. Later, he sold at 4.5 yuan per catty, 5.15 yuan per catty, and 5.5 yuan per catty. The most recent transaction, just two days ago, was at 5.7 yuan per catty.
"Last year's yield was 600 catties per mu, this year, due to poor weather, it's only 500 catties." Although there are still some cottons left unharvested in the fields, and there are also one or two thousand catties of raw cotton stored at home waiting to be sold, Chen Bijü estimates that after deducting costs, this year's cotton income can reach 100,000 yuan.
Compared to last year, despite reducing the planting area by 10 mu, the income has nearly doubled. Such changes feel like a dream, how could he not be happy?
Cotton Farmer No. 3
8 Mu Cotton Fields, Last Year's Income Was More Than 10,000 Yuan, This Year It's 20,000 Yuan
People Continuously Coming to Buy Cotton, But Afraid to Hold Onto It, Fearful of Sudden Price Drops
Wu Jiahong likes watching TV and reading newspapers, staying informed about the country's situation and policies. "It's not normal for cotton prices to be too low; it's time for it to rise. Isn't everything, including agricultural products, rising in price now? Yesterday's newspaper said apples are also going to rise in price. Aren't people increasing their consumption?"
"Last year, it was 2.8 to 2.9 yuan per catty, now it's 5.8 yuan." Wu Jiahong said that last year his family's cotton income was over 10,000 yuan, and this year, making 20,000 yuan should be no problem.
Chen Yulan told the reporter that she doesn't mind her husband leaving her alone at home to manage the farm work.
"No problem, 20 dan (one dan equals 100 catty) were all picked by me." Chen Yulan said she has already sold two batches of raw cotton. The first batch was at 3.9 yuan per catty, selling 1300 catty. The second batch was at 5 yuan per catty, selling 780 catty.
"Of course, I hope for a price increase." Chen Yulan said that people coming to her home to buy cotton have been endless this year, and the price of cotton seems to have no end in sight. However, Chen Yulan said she dare not keep the cotton at home ("store cotton"), afraid of waiting for higher prices and then suddenly facing a price drop. Instead, she sells it immediately after picking and drying it simply. She still feels somewhat fearful: what if the price drops? Then, instead of having people surrounding her to buy cotton, she would have to chase others to sell it. That wouldn't be something to joke about. Wu Jiahong and Chen Yulan live in Group 8 of Guangcaicun Village in Qianqiu Town, which is the high-quality cotton planting base for cotton variety No. 6 in Sheyang County. The total planting area is 150 mu, with 26 households. The entire town of Qianqiu has a cotton planting area of 45,000 mu this year. Jiang Zhong, a technical officer specializing in cotton at the Agricultural Technology Promotion Service Center of Qianqiu Town, introduced that the cotton planting area in Qianqiu Town was 50,000 mu last year, reaching a peak of over 70,000 mu previously. Among the 45,000 mu planted this year, 50% are intercropped with wheat or garlic.
Ji Ronghua, deputy director of the Crop Cultivation Guidance Station of Sheyang County and senior agronomist, who accompanied the reporter during the interview, introduced that the economic benefits of intercropping are relatively high. If cotton is intercropped with garlic, the yield of garlic sprouts in one mu of cotton field is between 1200 to 1500 catty, priced at 3 yuan per catty; garlic heads yield 1500 catty per mu, priced at 5 yuan per catty, resulting in gross income of over 10,000 yuan. After deducting costs, the net income is around 7000 yuan.