In mid-September, Xinjiang cotton opened scales sporadically, and the opening price was in line with market expectations. However, the price of Zheng cotton continued to fall. It seems that the logic of opening scale prices to support the rise in cotton prices has failed. In fact, this year’s sharp increase in the opening price due to the influence of fundamentals has already been digested by the market, and futures have also reflected it in advance on the market. The current cotton price is at a high level.
The current open scale price is not representative. Only when new cotton is launched in large quantities will it have reference value
Nowadays, all the cotton purchased by open scales is early-maturing varieties, especially hand-picked cotton. Ginning companies mainly process it into wadding cotton and sell it to various regions. The uses of wadding cotton and spun cotton are different, and the purchase prices are very different. In recent years, with the continuous improvement of cotton planting technology in Xinjiang, the proportion of machine-picked cotton has increased rapidly even in southern Xinjiang. Until early September, Xinjiang had few weighing companies, and the price range was wide, generally between 9.2 and 10.0 yuan/kg. When new cotton is actually launched in large quantities, there will not be such a big difference in the prices of various companies. Therefore, the current price is not representative. sex. According to the current purchase price of enterprises, the cost of new cotton is generally more than 18,000 yuan/ton. The current futures price has dropped to 17,500 yuan/ton, and the difference between futures and current prices is more than 500 yuan/ton. It is really difficult for enterprises to perform hedging operations.
The contradiction between the purchase cost of new cotton and hedging will last throughout the entire purchase period
The cost of new cotton purchase and processing plays an important role in the price of lint cotton this year. important role. The acquisition of new cotton is concentrated from September to November, and the acquisition cost determines the actual selling price of new cotton this year. During this period, the rush to harvest cotton in Xinjiang should become a frequent drama. Xinjiang’s cotton processing capacity is oversaturated, and companies have to compete for limited resources every year. Especially for factory contracting companies, if they rush to acquire goods at a high price, they can still gain certain opportunities by hedging market risks in the futures market later. If they do not acquire, they are destined to lose money. Faced with the dilemma of riding a tiger, many companies would rather gamble. Market outlook.
It is an established fact that the purchase price will be high this year, and futures prices will also follow the trend of the spot market. The specific seed cotton purchase price will open higher and go higher, or open higher and go lower. The market is still uncertain. There are certain differences, but no matter how it runs, opening higher is a high probability event. This year’s lint cost and price focus will also shift upward. During the acquisition period, the cost of lint is always higher than the futures price, which makes hedging more difficult for companies. According to historical K-line observations, the price of Zheng cotton will resonate with the market spot purchase price, but the price is always lower than the spot price. This means that futures prices will not rise sharply in the early stages of the acquisition. After all, the seed cotton acquisition has just begun, and the entire market’s rush to harvest has not yet reached its peak.
The market faces the risk of a correction and the bottom support is obvious
According to the time dimension, there are both short and long positions. A more sufficient reason. In the short and medium term, the price of sporadic openings in Xinjiang has already risen significantly. When new cotton is launched on a large scale, the atmosphere of rush to harvest will only become stronger, and futures prices may rise in resonance. Of course, there is support from output data. According to national cotton market monitoring data, the country’s total new cotton output in 2021 is expected to be 5.578 million tons, a year-on-year decrease of 6.3%, and Xinjiang’s total new cotton output is 5.017 million tons, a year-on-year decrease of 4.5%. From the perspective of global supply and demand fundamentals, the USDA September report predicts that global production and consumption will both increase, but the increase in consumption will be greater than that of production, and inventories will continue to decline. In addition, as long as the Fed does not take substantial recovery actions from the water it releases, commodity prices will remain strong, including cotton.
18,000 yuan/ton is already at a relatively high level and the structural contradiction is unsustainable
In the long term Look, there are hidden concerns about cotton prices. According to forecast data from the National Cotton Market Monitoring System, my country’s cotton production and demand gap in 2020/21 is 2.662 million tons, an increase of 122,000 tons compared with 2020/21. Although it seems that the absolute value of the gap between production and demand is large, based on the sum of domestic industrial and commercial inventories, reserve cotton rotation quantity and import volume, it can completely make up for the gap between production and demand, and there is no shortage of cotton in the market.
Structural shortages are also an indispensable factor in causing cotton prices to rise for one consecutive year. The global epidemic is raging, and foreign orders are continuously transferred to China. The profits of superimposed cotton yarn are very high, which further stimulates cotton consumption. In addition, as the epidemic is gradually brought under control, global textile and clothing consumption rebounds rapidly, which also stimulates the rise in cotton prices. What is worrying is that the most difficult period of the foreign epidemic is gradually passing, indicating that the peak of foreign transfer orders is gradually fading away, leaving little time for domestic companies. Therefore, structural contradictions are slowly easing. Looking at the Khmer price of 18,000 yuan/ton, it is historically considered to be on the high side. It may only be a matter of time before the cotton price returns to its true price. The state guarantees supply and stabilizes prices, and there are concerns as the market continues to rise.
After the State Administration of Grain and Reserves successively sold non-ferrous metals and cotton to stabilize the market, it will soon plan to sell crude oil to regulate the market and stabilize prices. On August 23, the Office of Fossil Energy and Carbon Management (FECM) under the U.S. Department of Energy (DOE) announced a notice to sell crude oil from the Strategic Petroleum Reserve (SPR). The U.S. Department of Energy plans to sell up to 20 million barrels of crude oil from the SPR. This is the largest reserve selling program in the United States since 2014. According to historical data, when the United States sells crude oil in large quantities, oil prices will inevitably see a sharp correction. At this time, China and the United States plan to sell crude oil at the same time, and the prices of energy and chemical products will definitely come under pressure. Polyester staple fiber and viscose staple fiber can replace cotton.If the prices of both continue to fall, there will also be certain substitution pressure on cotton prices.
The “Golden Nine and Silver Ten” orders were lower than market expectations. The shipping issue requires great attention.
Originally traditional production and sales The peak season should be the most prosperous time for enterprise production. The lack of peak season this year is beyond the company’s expectation. After all, the lack of slack in the off-season gives enterprises room to imagine the peak season. Regarding the reasons for the slow peak season, some market participants believe that the early orders were overdrawn in the later stages. Due to the great difficulties in global shipping this year, not only the freight rates increased, but also the transportation time was extended. In order to ensure that the products are received within the specified time, Companies rush to place orders early.
In addition to the lack of new orders, the sharp increase in sea freight is not conducive to textile and clothing exports, which will have an impact on domestic cotton textile export enterprises. According to international shipping professionals, although the global epidemic is gradually stabilizing and the skyrocketing ocean freight rates will moderate, ultra-high freight rates will remain at least until the first half of 2022. International shipping companies also said that after more than ten years of downturn, the international shipping business has finally ushered in a major historical opportunity. Shipping companies will never let go of this rare opportunity. In the future, international shipping prices will remain at high level. With sea freight rising, high value-added products have a greater chance of being exported, while low value-added textile and clothing products face greater export pressure.
Comprehensive analysis shows that there is still time and space for cotton prices to rise. For cotton prices that are already at a high level, the risks of continuing to rise are also high. It will be doubled and the irrational rise can continue for a period of time, but it will not last for a long time. The market will eventually return to the right track of value.
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