According to the China Cotton Information Network, on July 20, 6,000 tons of central reserve cotton entered the market, and 3,040 tons were actually sold, with a transaction rate of 51%.
The China Cotton Reserve Information Center stated that since mid-June 2022, domestic and foreign cotton futures prices have experienced an unprecedented sharp decline, and bonded cotton shipments have increased. However, the instability of the cotton market and the difficulty in export recovery have made it difficult for companies to expand purchases. At present, the economic recession is expected to have an impact on the global textile industry. Textile export orders are still not optimistic. Domestic cotton consumption has dropped significantly. In addition, the cotton market has fluctuated violently. Enterprises’ willingness to buy cotton is sluggish. It is difficult to increase the volume of foreign cotton purchases and only maintain rigid demand purchases.
At present, Xinjiang, my country’s most important cotton-producing area, is at its peak flowering. What is the cotton production situation in the new season? At present, old cotton is difficult to sell and downstream demand is poor. How can ginners and traders with large cotton resources tide over the difficulties?
From July 10th to 18th, reporters from Futures Daily followed the “Research Team on Cotton Production Situation in Southern Xinjiang during the 2022 Flowering Season” and conducted a special investigation on the development status of the cotton market in Southern Xinjiang. A comprehensive survey shows that although domestic and foreign spot cotton prices have fluctuated significantly recently, this is an expected trend. At a time when cotton pests are serious in southern Xinjiang and there is a lack of charterers for ginning factories, the key to how cotton prices will go in the future depends on demand.
“Last year’s lint production cost was 23,000-24,500 yuan/ton, but the current market price is only 13,600-15,500 yuan/ton, which will definitely make it difficult for ginners and others to survive, and will also inevitably affect the opening price of new season seed cotton. Wait.” Yang Yong, the “Old Cotton” of Henan Province, told reporters that abnormal phenomena or market conditions in the market indicate that the market structure has undergone tremendous changes, and investors should think carefully before entering the market.
Li Hua, a cotton trader in Korlaer City, Xinjiang, believes that due to overcapacity, ginneries have been “rushing to harvest” in the past three years. The current downward trend in cotton prices may be a good “reminder.”
According to the reporter’s understanding, due to the limited resources in the domestic cotton market, everyone has recognized the upward trend in cotton prices in recent years. Coupled with the stimulation of over-expansion of ginner production capacity, cotton prices have been rising for a long time. At the same time, downstream demand continues to weaken. The result of “one negative and one positive” has not only changed the market supply and demand relationship, but also caused qualitative changes in the operating environment of many industrial enterprises.
Li Hua said that from the perspective of the Chen Cotton market, the commercial inventory in the domestic market is relatively large. Although textile companies have almost no raw material inventory, they cannot assume that prices will rise in the future. The main reason is that there are no signs of stronger market consumption in the later period. In addition, it is now the midsummer season, and domestic cotton is entering its peak peach-bearing season. Coupled with good weather conditions, a bumper cotton harvest is expected in the new season.
The reporter’s investigation found that the new season cotton growth in southern Xinjiang is very vigorous, and the probability of increase in unit yield and total output is very high. The only uncertain factors at present are the weather and pest control conditions in the future production areas. Information released by the local meteorological department shows that this year Xinjiang is not only rainy, but also has a lot more high-temperature weather. On the one hand, this increases the accumulated temperature required for cotton growth, which is conducive to increasing yield; on the other hand, it also indicates that the probability of insect damage is higher. Reporters in Maigaiti County and other places saw that more cotton bolls have entered the bollworm.
According to the reporter’s understanding, the current losses of cotton ginning mills in Xinjiang are very serious, and the losses of individual companies have reached 10,000 yuan/ton, resulting in many cotton ginning mills being unrented this year. Some market participants believe that, provided there are no major changes in policies and exports, the production cost of new lint cotton in the new season may fall to 12,000 yuan/ton.
Yang Yong suggested that when domestic demand is declining, relevant domestic institutions can also consider exporting domestic cotton, such as exporting large quantities of Xinjiang cotton locally. At the same time, textile companies in the southern region, especially those that mainly sell products for export, can use a large amount of imported cotton. Textile companies in Henan, Shandong and Xinjiang can use Xinjiang cotton as their main production raw materials. The important thing is to produce products that meet domestic demand. diversified and personalized products to stimulate domestic demand growth.
“Judging from the monthly supply and demand report of agricultural products in July released by the US Department of Agriculture, the supply in the US and global cotton markets is becoming looser. For example, the sown area of cotton in the new season in the US may reach 12.48 million acres. Coupled with the negative macro environment, cotton will be affected in the short term. Prices do not yet have the conditions for a sharp rebound.” Li Hua said that currently many domestic textile companies have either reduced their operating rates or stopped production. If the demand development trend does not reverse, ginning mills need to pay attention to risk prevention and control.
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