By Xi Jin, Manager of International Cooperation, China National Cotton Information Center Beijing, China
Value In Brands
The premium of cotton partly exists in quality, but mostly in brand. Tagging the cotton brand onto the end products will boost the value of cotton to a great extent. Supima, Giza, SJV, Certified FiberMax and Stoneville are good examples. Every time I conduct surveys in cotton warehouses, I find some domestic cotton brands printed on cotton bales. The textile mills know these brands, but they have never passed the information of cotton brands on to end-consumers. That is to say the domestic cotton brands have never given full play to its effect in the market. It is not easy to set up a complete value chain from field to store shelf, but it seems to be the most efficient way to maximize the premium of cotton.
In my opinion, China’s high-price cotton reserve procurement during the past two years resulted in quantity-oriented cotton production. It will only stimulate Chinese textile mills to strive for cotton imports. In consideration of rising production costs in China and the fierce competition with India, Pakistan and a number of Southeast Asian countries, Chinese textile mills have no alternative but to seek higher added value from their products. In turn, this leads to further demand for imported cotton with good brand effect throughout the entire cotton value chain.
Creating Demand
China announced its target price of RMB19,800 per metric ton or 147 cents per pound to protect domestic growers on April 5 and meanwhile suspended the cotton reserve procurement. I believe this means that Chinese cotton growers can get the subsidy as long as the market price is lower than the target price.
I don’t think it could terminate the quality-oriented cotton production. In turn, China National Cotton Reserves Corporation (CNCRC) is selling reserves at the price of RMB17,250 per metric ton or 128 cents per pound, which is still much higher than in the foreign market.
In a word, foreign cotton with good brand names will have robust demand in China now and in the future.
Foreign cotton with good brand names will have robust demand in China now and in the future.” – Xi Jin