The upstream ecological dilemma of textile enterprises: the sharp drop in cotton prices only earns labor costs

The upstream ecological dilemma of textile enterprises: the sharp drop in cotton prices only earns labor costs

Sample from Sheyang, a major cotton-producing county: Thoughts on the ecological dilemma in the upstream of textile enterprises

“Next year I will not plant so much cotton and will switch to rice.” On January 10, a farmer from Changdang Town, Sheyang County, Jiangsu Province Cotton farmer Zhang Aizhong shook his head and told reporters, “The price is too low.”

Zhang Aizhong’s other identity is that of a worker at Sheyang Yinjia Cotton Co., Ltd., where the cotton he grows ends up. Sheyang Yinjia Cotton Co., Ltd. purchases seed cotton from cotton farmers, processes it into lint, and then sells it to textile companies. However, even if the seed cotton is purchased at a lower price than in previous years, Fan Haiping, chairman of Yinjia Cotton Industry, is not happy.

With the continuous spread of the financial crisis, my country’s textile industry is in a difficult situation. Such difficulties are quickly passed from the downstream to cotton processing companies and purchasing companies, and then to the upstream of the cotton industry – cotton planting industry.

Due to changes in market supply and demand, upstream production capacity regulation was eventually brought about. “According to our estimates, the cotton planting area in Sheyang County will decrease by more than 20% this year.” Chen Zhanlong, president of the Sheyang County Cotton Association, told reporters.

At the same time, in response to low cotton prices and no market, on December 22, 2008, the state issued the “Announcement on the Release of the Third Batch of Cotton Purchase and Storage Plan and Related Requirements for 2008”, and once again issued the third batch of A total of 1.5 million tons of cotton purchase and storage plan, at the same time, a low protective price for seed cotton was also formulated for the first time in this document.

Cotton prices plummet

“This is a difficult situation that our Cotton Association has encountered since its establishment in 2001.” Chen Zhanlong, who has been the president of the Sheyang County Cotton Association, told reporters.

Sheyang County is a well-known cotton-producing county in the country and a county with the highest cotton output in Jiangsu Province. According to statistics compiled by the Sheyang County Cotton Association in mid-November last year, as of November 13 last year, the county had purchased 36,800 tons of lint cotton, a decrease of 6,700 tons compared with the same period last year. 70% of the new cotton was sold, and 30% of the new cotton was sold. % in the hands of cotton farmers or brokers. Under normal circumstances, the cotton purchase was nearing completion at that time.

One of the direct reasons for this situation is that the price of cotton has been falling since the date of acquisition. At the beginning of the scale opening, the price of seed cotton was around 2.80 yuan/jin, and then gradually dropped, reaching a low of less than 2 yuan/jin. According to Chen Zhanlong, the average purchase price of seed cotton last year was 6.07 yuan/kg, but this year the average price per kilogram was only 4.7 yuan, a year-on-year decrease of 1.37 yuan.

Fan Haiping settled an account for reporters. Due to the increase in the prices of chemical fertilizers and pesticides this year, the cost of planting cotton per mu of land, including workers’ wages, pesticides and fertilizers, etc., is about 1,200-1,300 yuan. Based on the yield of 450 kilograms of seed cotton per mu, the price of seed cotton per kilogram is 2.5 yuan. The income from cotton per mu is only 1,100-1,200 yuan, and “cotton farmers lose about 200 yuan per mu.”

“What I earn now is labor money.” Zhang Aizhong told reporters, which is why he doesn’t want to grow cotton. He could also sell all the cotton to the factory, while many cotton farmers had to store cotton at home because the price was too low. “When prices were high last year, farmers harvested the cotton before it was ripe and sold it,” Chen Zhanlong said.

Another thing that gives Zhang Aizhong a headache is that he has not received the money for selling cotton. “Now the company has no money to give, so it can only wait.” Under this situation, the cotton planting area will inevitably be affected. According to the association’s survey of 32 cotton farmers, the cotton planting area in Sheyang County this year will decrease by 27.92% compared to last year.

“In the past, a quarter of Sheyang County’s fiscal revenue came from cotton planting and processing, but now there is no other way.” Chen Zhanlong said.

High inventory and triangular debt

This is a bottom-up industrial chain transmission process, with the source being downstream textile companies.

Relevant surveys show that in recent months, the price of cotton yarn has fallen more than the price of cotton, and more than 60% of downstream cotton yarn companies have closed down. Even if the price of cotton yarn is reduced, it cannot be sold and realized, and downstream companies that demand cotton yarn also have large inventories and tight capital chains.

This directly led to the decline in market demand for cotton and the price. Dexiang Cotton Industry, which basically achieved simultaneous processing and sales in Sheyang County last year, purchased a total of 5,200 tons of seed cotton last year. By December 10 last year, it had processed 1,200 tons of lint cotton, and only sold 300 tons, accounting for only 25% of the available sales.

“Now the textile companies are running and stopping, and they have no money to pay for the cotton.” Even Fan Haiping himself also encountered the situation of being “taken for free”: the lint cotton was finally sold, but the downstream companies also had to pay for it. I couldn’t get the money, so I had to owe it.

Chen Zhanlong said that banks’ caution in lending is also one of the reasons for the current difficulty in collecting cotton. Fan Haiping also said that due to the financial crisis, it is difficult for companies like his to get loans. In previous years, he usually used the start-up funds from loans to purchase cotton. At the same time, the processed lint cotton has no market now. Previous old customers, such as some textile factories in Taicang, no longer want a penny of goods this year.

According to statistics from the association, in mid-to-late October last year, the amount of “IOUs” in Sheyang County once reached 50 million yuan, while in previous years there was almost no arrears.

In fact, Yinjia Cotton Industry’s backlog of lint has been mortgaged and obtained.�Some of the funds are repaid to cotton farmers. “Now let’s see if we can get the money back before the Spring Festival and settle the cotton farmers’ money.” Fan Haiping said helplessly.

Yinjia’s situation is not too bad in Sheyang County. In Sheyang, cotton processing and textile enterprises have always been the main body of cotton purchase. Last year, the cotton they purchased accounted for 42.6% of the total cotton output in Sheyang, but this year, this figure dropped to 18.13%.

In Chen Zhanlong’s view, the import of foreign cotton has also had an impact on the domestic cotton industry. At present, the domestically imported short-staple cotton is about 300,000 tons per year, and the price per ton of imported short-staple cotton is nearly 1,000 yuan cheaper than ordinary domestic cotton. Many processors use imported short-staple cotton to process denim, which has had a huge impact on domestic cotton demand.

Government bailout

Sheyang is just a microcosm of this year’s cotton situation crisis. Previous statistics from the National Cotton Market Monitoring System Center showed that China’s cotton planting area may shrink by about 18% in 2009. And by the end of last year, cotton farmers still had 30% of their cotton unsold.

In order to stabilize the cotton market and protect the interests of cotton farmers, the country has successively introduced a number of rescue measures since the second half of 2008, including increasing the export tax rebate rate for textiles and clothing, the issuance of the “Six Measures”, and the 1.22 million tons of Cotton collection and reserves.

As of December 19, 2008, the 1.22 million tons purchase and storage plan that the country has introduced has come to an end (the first phase at the end of October and the second phase from November to the present). Among them, the cumulative purchase and storage transaction in 2008 was 877,400 tons of Xinjiang cotton, Mainland cotton is 307,350 tons, totaling 1,184,750 tons, accounting for 97.11% of the planned purchase and reserve of 1.22 million tons.

At the same time, some experts suggest implementing low purchase protection prices for cotton to protect the interests of cotton farmers and stabilize cotton production. On December 22, 2008, the state issued the “Announcement on the Release of the Third Batch of Cotton Purchase and Storage Plan for 2008 and Related Requirements”, adding an additional 1.5 million tons of purchase and storage plan to the 1.22 million tons. Previously, the market expected the launch of the third round of purchase and reserve plan after the end of the year.

Compared with the two previous batches of purchase and storage plans, the third batch of purchase and storage plans further reflects the country’s fundamental purpose of stabilizing the cotton market and protecting the interests of cotton farmers. It also formulates a low protective price for seed cotton for the first time and strictly regulates delivery operations. It is required that from the date of announcement, delivery companies must purchase the seed cotton sold by farmers at a price of no less than 2.6 yuan/jin for the delivery quota won in the trading market. When delivering storage, they must provide the corresponding purchase code sheet and accompany the goods. colleagues and serve as one of the basis for the preliminary test.

“After the later purchase and storage plan is introduced, some places have almost purchased cotton.” On January 8, a person from the Jiangsu Cotton Association told reporters. According to statistics from the association a month ago, 20% of the cotton in Jiangsu Province has not been purchased, and currently, this proportion has dropped to about 10%.

The reporter learned from the Jiangsu Provincial Cotton Association that in early December last year, the Jiangsu Cotton Association specifically requested relevant departments of the provincial government in the form of a report regarding the current plight of the cotton industry. In this report, the Jiangsu Provincial Cotton Association recommended formulating a provincial purchase and storage plan, with the provincial finance allocating special funds to establish a cotton purchase and storage mechanism.

According to the above-mentioned person, after the report was published, the relevant departments of Jiangsu Province have issued a cotton purchase and storage plan of 30,000 tons, which will also greatly solve the current problem of difficulty in selling cotton.

Chen Zhanlong told reporters that in response to the current situation where corporate loans are difficult to “make free notes”, rural commercial banks have increased their loan offerings through consultation. As of December 20 last year, the number of “white tickets” in Sheyang County had dropped to 20 million yuan, and relevant solutions are still being taken.

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