Growers across China are very disappointed in the bids they are receiving for new crop seed cotton. In many instances, growers are picking the cotton, taking it to the gin only to refuse the price and returning home with the seed cotton and storing it. In past seasons, aggressive competition from gins afforded growers several selling options and usually resulted in ginners bidding for their seed cotton, but this is not the case this season. Ginners are cautiously approaching seed cotton procurement and are not bidding aggressively. Growers in the largest cotton-producing centers are finding more attractive bids from a few of the smaller gins, which operate without a government-approved certificate. These operations buy seed cotton for cash, gin it quickly and sell the lint for small profit margins -- cotton bales are irregular in size and contamination is an issue. The government has succeeded in cutting down on the number of such gins, but they are still operating.
Seed cotton prices are being influenced by the continued weakness in cottonseed oil and meal prices. In Jiangsu, for example, the September 2 price of Grade 4 cottonseed oil locally was 9,600 to 9,700 yuan per ton, a decline of 700 to 800 yuan per ton from the previous week. Pressing plants report a buildup in unsold cottonseed oil stocks. In Shandong, the cottonseed oil price is down to 9,400 yuan per ton.
Seed cotton prices across East China are generally falling into a range of 5.7 to 6.0 yuan per kilogram for Grade 3 lint with ginning outturn of 37 to 38 percent. Lower grade lint of Color Grade 4 and 5 and much lower ginning outturn of 35 percent are drawing only 5.2 to 5.4 yuan per ton for the seed cotton. Early-picked cotton is proving to be of poor quality. Growers are picking moldy, cracked bolls, pushing out the seed lint and drying it in their homes in hopes of improving grade and income. Earlier in the season, growers had expected seed cotton prices to approach 7.0 yuan per ton; but today, they would be happy with 6.0 yuan per ton. Currently, seed cotton prices are below year-ago levels, which has hurt profit margins.
