The pessimism caused by the mutant strain Omicron once spread, and Zheng Mian hit a low in nearly two months yesterday night. However, during today’s session, news of the suspension of the second batch of central reserve cotton came, which boosted market sentiment. Zheng cotton rebounded, with the main contract closing up 0.63% at 20,695 yuan/ton.
Announcement on suspending the release of the second batch of central reserve cotton
Related companies:
Taking into account the current cotton market situation, with the consent of relevant departments, the release of the second batch of central reserve cotton will be suspended from December 1, 2021. If there are major changes in the cotton market in the later period, the release of cotton from the central reserve will be restarted in a timely manner based on the market situation and regulatory needs.
China Reserve Cotton Management Co., Ltd.
December 1, 2021
Overnight ICE cotton futures plunged more than 4%, hitting the daily limit, due to concerns that the Omicron variant of the virus may hit demand for cotton. ICE’s most actively traded March cotton contract hit the 5-cent limit, fell 4.5%, and settled at 106.41 cents per pound, the lowest since October 27. Jack Scoville, vice president of Price Futures Group in Chicago, said new coronavirus variants are disrupting all markets, and cotton is no exception. Funds may be selling off as new variants of the virus may impact demand more than any other factor.
Domestic new cotton picking is coming to an end. According to data from the National Cotton Market Monitoring System, as of November 25, 2021, the national new cotton picking progress was 98.9%, a year-on-year decrease of 0.2 percentage points, and an increase of 1.7 percentage points from the average of the past four years. Among them, the picking progress in Xinjiang was 99.3%; nationwide The sales rate was 96.2%, an increase of 0.9 percentage points year-on-year and 4.0 percentage points higher than the average of the past four years. The sales rate in Xinjiang was 99.1%. In terms of price, as new cotton enters the centralized marketing period, the purchase price of seed cotton has gradually dropped to less than 10 yuan/kg.
In terms of cotton reserves, today China Cotton Reserve Management Co., Ltd. issued an announcement on the suspension of the second batch of central reserve cotton: comprehensively considering the current cotton market situation, with the consent of relevant departments, the second batch of central reserve cotton will be suspended from December 1, 2021 Cotton release. If there are major changes in the cotton market in the later period, the release of cotton from the central reserve will be restarted in a timely manner based on the market situation and regulatory needs.
Market Interpretation: How much impact will the suspension of reserve cotton release have on the market?
01 Fang Huiling, researcher at Orient Securities Futures:
02 Market participants:
Cotton futures rebounded in the afternoon, affected by the news that the cotton reserve was suspended. From October 8 to November 30, a total of 912,000 tons of reserve cotton were put into the market, and 572,000 tons were traded. After November, the main transactions were Xinjiang cotton and imported cotton, with an average daily transaction volume of 5,000-6,000 tons, accounting for the average daily domestic cotton consumption. About 1/4 of the total (annual cotton demand is calculated as 8.6 million tons), the suspension of reserve cotton is beneficial to the cotton sales of ginners. With the cost of new cotton high this year, ginners are generally willing to raise prices, which has made the recent decline in cotton spot prices far less than futures prices. As the delivery month approaches, the cotton 01 contract mainly focuses on the return of futures and delivery logic. With the suspension of reserve cotton release, it is equivalent to a marginal reduction in cotton supply, which has certain support for spot prices and promotes a rebound in futures prices. The trend of cotton 01 contract in the future will depend on the spot price trend. The 05 contract is temporarily affected by expectations of weak demand and is expected to be weaker than 01.
</p
