According to feedback from cotton trading companies, in the past week or so, the price of the Zheng cotton CF2205 contract has oscillated and dived from a high of 22,210 yuan/ton, falling below the 21,500 yuan/ton mark. In addition, the resumption rate of cotton spinning companies has generally reached more than 80%. Raw material replenishment is gradually put on the agenda, and the domestic cotton spot market has seen increasing activity in price inquiries and transactions.
On February 14, Zheng Cotton’s main intraday low was 21,280 yuan/ton, and the point-price transactions were significantly enlarged. Some cotton processing companies and traders in and outside Xinjiang that are 100% hedged have accelerated the pace of “selling spot goods and closing short orders”. Cotton companies that have not hedged or have a low hedging ratio are in an embarrassing situation, passively waiting and watching, and have few shipping opportunities.
A cotton company in Heze, Shandong Province said that the CF2205 contract fell below 21,500 yuan/ton, and the enthusiasm of downstream cotton textile mills and middlemen to take goods has significantly recovered. Not only will the point price sales of Xinjiang cotton with low basis difference and good spinnability in 2021/22 be accelerated, Shandong and Hebei real estate cotton shipments also showed improvement. The company has recently sold 13 batches of lint cotton from Shandong Jinxiang, Chengwu, Jining and other producing areas, with a basis difference of 50-150 yuan/ton. The majority of Xinjiang cotton transactions in mainland China are machine-picked cotton with low basis difference and low impurities. It is understood that from February 14th to 15th, the transaction price of real estate cotton in Shandong, Jiangsu and other warehouses during the “Double 28” by weight was concentrated at 21,780-22,000 yuan/ton, and the transactions of high-grade real estate cotton were relatively deserted.
Judging from the survey, although the Zheng cotton CF2205 contract exceeded the 22,000 yuan/ton mark at the end of January, there were not many Xinjiang cotton processing companies entering the market for hedging or arbitrage. On the one hand, cotton companies have strong expectations for a sharp rise in cotton futures after the Spring Festival, and the mainstream view is that the main contract will exceed 22,500 yuan/ton, resulting in a lack of hedging confidence among processing companies; on the other hand, even if the CF2205 contract is above 22,000 yuan/ton Hedging, machine-picked cotton with a premium of less than 1,000 yuan/ton is still in a state of no profit or loss, so the current main contract price of Zheng cotton is still not attractive enough for ginners; furthermore, considering the current bias in cash flow Due to the pressure of loan repayment in March, cotton processing enterprises are more inclined to spot sales and timely payment.
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