After a sharp rise last Friday, cotton futures prices hit a new high in more than three years on Monday. As of the afternoon close, the main cotton futures contract rose 6.78% to 18510.0 yuan/ton, with an inflow of 704 million yuan in cotton futures funds.
Wu Jingwen, cotton futures analyst at CITIC Futures, told reporters that the main factors for the upward price rise of Zheng cotton are: first, the purchase price of seed cotton is high, and the cost side drives up the cotton price. On September 26, some ginneries in northern Xinjiang started to open scales one after another. The purchase of new flowers started, and the price was high. The machine-picked cotton was 8.5-9 yuan/kg, and the cost of converted lint was more than 19,000 yuan/ton. This year’s new cotton production is expected to be reduced, while the production capacity of ginners is expanding, and against the background of reduced supply and increasing demand, the seed cotton harvest is expected to be strong, and the purchase price may be higher, which will form support for Zheng cotton. This year’s large-scale cotton picking in Xinjiang is expected to be delayed by 1-2 weeks compared to previous years. When seed cotton enters the large-scale harvesting stage, the rush to harvest may become more intense, and the purchase price of seed cotton may further rise. Second, the macroeconomic atmosphere has improved, and ICE cotton prices have bottomed out, driving Zheng cotton upward. Last Monday, macro factors were disrupted and risk aversion increased. ICE cotton prices fell sharply along with finance and commodities. Then the Federal Reserve meeting decision was in line with market expectations. Coupled with the impressive weekly US cotton sales data, ICE cotton prices bottomed out and rebounded. The latest export sales report released by the U.S. Department of Agriculture (USDA) shows that as of the week of September 16, U.S. cotton export sales for the 2021/2022 market year increased by 345,400 bales, an increase of 21% from the previous week, of which export sales to China were 21.98 Thousands of packages.
In the early hours of last Thursday, the Federal Reserve announced that it would maintain its benchmark interest rate at 0%-0.25%, in line with market expectations; last Saturday, Meng Wanzhou finally ended her three-year The illegal detention returned to China, and the macroeconomic situation and Sino-US trade relations were temporarily eased. The domestic market once again focused on the upcoming seed cotton harvest. “The price of the main contract of Zheng cotton rose sharply on Monday, reaching a new high during the session. The final increase of the main contract was as high as 6.78%. Compared with the previous year, cotton output this year has dropped significantly, and the shortage of production and demand has been the most serious in recent years. On the one hand, new cotton Output has declined, and Xinjiang has added a number of new cotton processing lines and expanded production capacity, exacerbating the situation of too much food and too little rice. A rush to harvest seed cotton is inevitable. On the other hand, from the perspective of supply and demand, the state reserve inventory is low and the gap between production and demand is large. There is an incentive to increase. At present, machine-picked cotton has been sporadically listed, and the purchase price of some 40-unit machine-picked cotton in northern Xinjiang is even more than 20,000 yuan/ton equivalent to the theoretical price of lint.” said Wang Xiaobei, senior cotton analyst at Hongye Futures.
Wang Xiaobei believes that there are frequent unfavorable factors such as the rotation of cotton reserves prohibiting traders from bidding, Zheng cotton raising margin standards, and weak macroeconomics. However, the downstream performance is not strong in the peak season. The operating rates of yarn and gray fabric have both declined, the inventory of finished products has accumulated, and power cuts in many places have made downstream consumption worse, which will drag down the price of Zheng cotton to a certain extent. Zheng cotton showed a high oscillation trend from late August to late September, and the main contract showed strong support at 17,000 points.
The reporter found during the interview that domestic cotton production is expected to decrease in the new year, but the extent of the reduction is uncertain. The China Cotton Association’s August survey report estimated that the country’s total cotton output was 5.834 million tons, a year-on-year decrease of 1.52%, and Xinjiang’s output was 5.3279 million tons, a year-on-year increase of 1.60%. However, the final output has not yet been determined, and market participants are divided on whether to reduce or increase Xinjiang cotton production, which requires continued attention.
At the end of August, the national cotton commercial inventory was 1.92 million tons, a year-on-year decrease of 530,000 tons. Inventory removal is accelerating, causing cotton prices to rise. Cotton production is expected to decrease in the new year. Currently, there are only about 200,000 tons of warehouse receipts left. Cotton supply in the fourth quarter is at a low level, which will help cotton prices rise. “Recently, downstream demand has deteriorated. The traditional peak season of ‘Golden Nine and Silver Ten’ has not been strong, and new orders have been insufficient. Finished product inventories of cotton yarn and gray fabrics have continued to accumulate since August. Under the dual-control policy, the operating rate of weaving factories has declined rapidly, and cotton yarn sales have declined. The difference has put cotton and cotton yarn prices under pressure. Pay attention to the changes in downstream demand in October. If the month-on-month improvement improves, the current pressure will be alleviated.” Wu Jingwen said.
Wang Xiaobei believes that from an industrial perspective, relevant departments may take measures to ensure supply and stabilize prices based on market changes and downstream demand situations, such as increasing cotton imports and cracking down on seed cotton harvest speculation. . In short, the market will not be short of cotton. In terms of downstream demand, compared with previous years, the downstream demand peak season has obvious characteristics of being sluggish, and domestic demand and export performance lack bright spots. Although the downstream operating rate has picked up recently, it is still not as good as the same period in previous years. To sum up, the market is currently focused on the rush to harvest new cotton, and prices are relatively strong. However, what cannot be ignored is that the domestic cotton supply is sufficient and traders and ginners have strong hedging needs.
“It is expected that cotton prices will rise easily but not fall during the acquisition season, and the focus may rise further.” Wu Jingwen said that driven by the rush to harvest seed cotton at the cost end and the overall downstream performance, October With demand still expected, we are relatively optimistic about the price of futures cotton. Cotton prices are easy to rise but difficult to fall, and the center of gravity is likely to rise. However, in the context of ensuring supply and stable prices, policy dynamics also need to be paid attention to, and the height of cotton prices may be limited. In the medium and long term, demand growth is slowing down, and there are concerns about peaking and falling in the future. ICE cotton prices and Zheng cotton prices are at a high level in the historical range. Without more favorable support, prices will easily fall back to high levels once the acquisition period is over. Cotton prices are likely to rise first and then fall in the fourth quarter.
The above-mentioned interviewees believe that new cotton is expected to be launched on a large scale around the National Day.The expectation of rush to harvest still exists. From a strategic perspective, cotton prices still have a certain degree of resilience before the new flowers are launched. Under the interweaving of long and short factors, cotton prices are difficult to trend. However, in the short term, there is still some momentum to rise due to expectations of rush for harvests. Investors need to pay attention to the market outlook and holiday accumulation. risks of. </p
