Cotton Acquisition "Dilemma": Loans Red Line Encountered Cotton Prices Skyrocketing

In October 12th, a person from the Agricultural Development Bank of China (hereinafter referred to as "agricultural development bank") told our reporter that according to the China cotton price index for the period from the end of September to October 7th, the risk control line of the standard cotton loan that was finalized within the Agricultural Development Bank was 18200 yuan / ton (910 yuan / load), and the purchase price of seed cotton was 8.7 yuan / kg.

"This guidance price is substantially lower than the actual purchase price of the current market at least 11 yuan / kg." The person said, 8.7 yuan / kg of guidance price is impossible to get cotton.

The situation has been gradually fed back to the head office of the agricultural development bank. The reporter was informed that on Friday, the head office also reminded the branches of Xinjiang's cotton producing provinces to "watch carefully" and strictly abide by the two red lines.

"That means Cotton acquisition The loan is temporarily unable to enter the market to buy seed cotton. These people said. The soaring cotton price has almost made the red line of the new cotton purchase price virtually nominal.

Loan red line encountered cotton prices soaring

The reporter was informed that at the end of September, the Agricultural Development Bank issued the notice on the implementation of the 2010 cotton purchase loan line and the risk control line of the cotton industry in the system. According to this document, the 2010 cotton year's standard cotton loan line was set at 700 yuan / load, the highest can float 50 yuan / load.

According to the calculation of 750 yuan / Dan, the on-line loan of seed cotton is about 7 yuan / kg. This red line defines the maximum loan amount that cotton processors can acquire for one kilogram of cotton.

Meanwhile, the Agricultural Development Bank also delineated the purchase price line controlled by loan risk. The price line is based on the average price of China's cotton price index released by the China Cotton Association in the previous week and deducted from processing fees, financial charges, warehousing charges, spanportation charges and reasonable profits. If the purchase price exceeds this guidance price, the acquisition will not be supported by the loan from the agricultural development bank.

The aforementioned agricultural development sources said that in addition to the Agricultural Development Bank and the ministries of the national development and Reform Commission, the annual line of loan risk control standards was decided. The red line is normally released every Monday in the internal system and is effective within a week.

In fact, China cotton At least 50% of the takeovers depend on the loan support of the Agricultural Development Bank, and the proportion of the main cotton producing areas in Xinjiang even reaches 70%. As a result, the two new cotton purchased by the agricultural development bank every year is considered an important price vane for the new cotton market.

The price of seed cotton has gone up since the launch of seed cotton this year, and the price of seed cotton, which is not good in Xinjiang, Hubei and other main producing areas, has exceeded 11 yuan / kg. This market situation is a big surprise for the industry. Wang Qianjin, chief analyst of the first textile network, said that in September, the price of seed cotton in the new year was generally estimated to be controlled at eight or nine yuan / kg, which is roughly the same as the risk control line of the agricultural development bank.

The head of a large cotton processing enterprise in Hubei told reporters in October 12th that just now, it was confirmed from the agricultural development bank that the company could get about 40 million of the loan amount from the Agricultural Development Bank this year for the acquisition of new cotton. However, from the current situation, this loan is likely to be useless. "If we want to lower the price within 8.7 yuan per kilogram, it is impossible to buy cotton. At present, we use our own funds to buy seed cotton."

The lowest purchasing price of seed cotton is 10.6 yuan / kg in recent years, and the quality of seed cotton is not high. He said buyout companies, including local processing plants, are rushing to buy Cotton in recent years. "In the past few years, cotton farmers have been loading their own cars and queuing up to sell cotton. This year cotton is picked up by cotton merchants waiting for loading."

The situation in Xinjiang is similar. Xinjiang area Cotton and linen Supply and marketing cooperatives said that in order to get loans to cotton, some processing factories had to adopt the magic trick called "dual track system" by the industry. On the surface, they received cotton according to the loan risk control line of the Agricultural Development Bank, and the price and the difference between the actual price of the market and the price of 3 yuan per kilogram were supplied to cotton farmers privately through their own funds.

In fact, the loan risk control line of the Agricultural Development Bank also has the possibility of adjustment. Liu Meisheng, vice governor of the Agricultural Development Bank, said at the end of 9, the annual cotton conference held by the seven departments, such as the Ministry of agriculture, said that the head office would adjust the "two line" policy according to the actual situation. He said that taking into account the complex market situation of the 2010 cotton year and the difference in risk tolerance of different enterprises, the provincial branches could appropriately float the risk control line without breaking the loan line.

And because cotton purchase has no policy to reveal, when new cotton comes into the market every year, how to find a balance between doing something and preventing risks is the biggest problem before the Agricultural Development Bank of all cotton producing provinces.

A person from the Hubei branch of the agricultural development bank told reporters that the branch will be more market-oriented this year, taking into account the "double line" policy drawn up by the head office.

Cotton price pushing hand {page_break}

The serious decoupling between the loan guidance price and the actual purchase price is closely related to the unexpectedly large increase in cotton prices in the near future. China's cotton price index showed that the average price of grade 328 cotton in August was 18124 yuan / ton, and it rose to 19323 yuan / ton in September, and the price in October jumped to 23072 yuan / ton, far exceeding the expectations of all parties.

At the end of 9, seven ministries and commissions of the annual cotton conference, Zhang Xiaoqiang, deputy director of the NDRC, said that the cotton output in the new year will be reduced compared with the previous year, and the gap between supply and demand will exceed that of the previous year. China's cotton production last year was 7 million tons, and the gap between supply and demand was about 3 million 600 thousand tons.

Wang predicts that the annual output of China's 2010 cotton is roughly 6 million 700 thousand tons, and consumption is roughly 10 million 500 thousand tons. "At least 3 million tons of supply and demand gap exists."

In fact, due to the distortion of statistical data, the output and consumption data of cotton in China has been a muddle for a long time. It is very difficult for policymakers to accurately judge the gap between supply and demand through data and make accurate decisions.

Wang Qianjin believes that the fundamental reason for the sharp rise in cotton prices is the imbalance between supply and demand. One of the proofs is that the rise in cotton prices is a simultaneous rise in domestic cotton prices, international cotton prices, spot and futures.

The reporter learned that behind this surge in cotton prices, there are factors of imbalance between supply and demand, but there are also factors of speculative capital inflow.

A person from the Hubei branch of the Agriculture Development Bank found that the purchasers in Shandong and Zhejiang were actively looking for cotton in the cotton producing area, but those funds were not used to produce cotton seeds, but to store up goods. He learned that these funds had just finished speculation after the acquisition of cotton.

Aforementioned Hubei large processing plant responsible person told reporters that most of the processed cotton this year was sold away by middlemen at high prices. In the past, lint was generally sold directly to textile enterprises.

The official told reporters that suppliers generally had to wait for cotton prices to rise 1000 yuan or even 2000 yuan per ton before they would sell.

At the beginning of this year, the Xinjiang Zhejiang chamber of Commerce estimated that at least 10 billion yuan of Zhejiang's private capital would be spanferred to Xinjiang cotton after the withdrawal of Shanxi coal mines and the domestic real estate market. There are industry speculators told reporters that in Zhejiang, some professional cotton investment institutions have been quite well-known in the industry. They have been in the industry for many years, and will issue very sufficient investigation and planning plans before gathering funds.

Reporters also learned that in order to avoid the Agricultural Bank's loan capital inflow hype chain, the main cotton producing areas of the agricultural issuers have strengthened the monitoring of processing plants. "Enterprises should at least have" three have ", that is, contracts, benefits and sales, it is possible to obtain loans. The above-mentioned farmers said that taking into account the risks behind the high cotton prices, the security system and the whole process of monitoring have been reiterated.