Abstract: This paper analyzes correlation among yarn production, fiber production and cotton price from 2000 to 2011 in China. The paper first uses the co-integration analysis among these variables, then, try Granger causality test with cotton price volatility, yarn production volatility and fiber production volatility. Result shows the following conclusions, cotton price, yarn production and fiber production have long term co-integration, yarn production, fiber production have little impact on cotton price; volatility of the textile demand has little impact on cotton price volatility;fiber has little effect as cotton alternatives.

Key words: cotton price, yarn production, chemical fiber production, co-integration analysis, Granger causality