Lint cotton cost control is becoming a survival lifeline for gins under valuation growth expectations. Zhao Ming, General Manager of Zhongmian Group Handan Company, pointed out in a cotton industry course that adjustments in acquisition targets must be based on a thorough understanding of the cost accounting system; otherwise, the entire processing season could become passive.
Cost Breakdown: Dual Pressure from Acquisition and Processing Lint cost consists of acquisition cost and processing cost, with acquisition cost accounting for the largest share and being highly volatile. Public industry data shows that the deduction effect of cotton by-product income on total cost cannot be ignored. Taking Xinjiang cottonseed as an example, its production accounts for over 85% of the national total, and its diverse uses—processing, seed retention, and pasture feed—make it a key variable in cost allocation. When lint prices fluctuate, the selling price of by-products directly determines the gin's profit margin.
Another core variable is the lint percentage. Every one percentage point change in lint percentage can cause a fluctuation of approximately 200-300 yuan per ton in lint acquisition cost. This requires acquisition personnel to make precise judgments on indicators such as moisture and impurities in seed cotton; otherwise, losses during later processing will directly erode profits.
Quality Control: The Fiber Economics Behind Premiums and Discounts Lint quality not only affects spinning efficiency but is also directly linked to premium and discount prices. If the intrinsic quality of seed cotton is not properly managed during harvesting and processing, fiber damage and grade degradation can lead to price losses of several hundred yuan per ton. From pre-treatment, ginning, lint cleaning to baling, each step has quality risk points. For example, excessive ginning speed can cause fiber breakage, while over-cleaning lint can result in short fiber loss.
This means that for buyers, focusing solely on lint price is far from sufficient. Lint cotton at the same price point can vary significantly in subsequent spinning performance, such as waste rate and yarn strength, due to differences in processing quality. Leading companies in the industry have begun embedding quality premium/discount clauses in procurement contracts, directly monetizing the effect of processing control.
Cotton By-Products: From 'Waste' to Strategic Resource The cost-sharing role of cotton by-products is being revalued. Xinjiang cottonseed, in particular, accounts for over 85% of national production, and its uses have expanded from traditional oil extraction to seed retention and pasture feed. When cottonseed prices rise, gins can use by-product income to subsidize lint costs, thus offering more competitive seed cotton prices during the acquisition season.
However, this also brings new challenges: the by-product market does not move in sync with the lint market. In 2025, Xinjiang cottonseed prices experienced seasonal declines, causing cost accounting deviations in some gins. Therefore, incorporating by-product income into dynamic cost models has become a mandatory course for refined gin operations.
The Current Acquisition Season: Strategic Adjustments Under Valuation Growth Expectations Zhao Ming specifically mentioned in the course that facing valuation growth expectations, acquisition targets need corresponding adjustments. The core lies in clearly understanding how all cost indicators affect the final accounting and conducting dynamic accounting during the acquisition process. This means gins cannot rely solely on historical experience to set acquisition prices; instead, they should build a real-time pricing model that incorporates variables such as futures prices, by-product market conditions, and lint percentage expectations.
From an industrial belt perspective, Xinjiang gins have generally started using order-based acquisition models earlier this year, attempting to lock in low-cost seed cotton at the planting source. Meanwhile, using futures tools to hedge lint price risk has become standard practice for an increasing number of enterprises.