Yesterday morning, China Cotton Reserve Management Co., Ltd. issued an announcement. Taking into account the current cotton market situation, and with the consent of relevant departments, 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.
After the news was announced, cotton, which had fallen sharply the previous day, took the opportunity to rebound strongly, but positions were significantly reduced, with an outflow of 603 million yuan from the cotton 2201 contract.
In addition, according to China Cotton Network, on December 1, the quotations for cotton imports from China’s main ports fell sharply. The international cotton price index (SM) is 123.94 cents/pound, down 5.1 cents/pound, which is equivalent to a general trade port delivery price of 19,432 yuan/ton (calculated based on 1% tariff, and the exchange rate is calculated based on the central parity rate of the Bank of China, the same below); International The cotton price index (M) was 122.49 cents/pound, down 5.14 cents/pound, which is equivalent to the general trade port delivery price of 19,207 yuan/ton.
It is understood that this year’s reserve cotton will be released in two batches. The current release is the second batch, with a planned release volume of 600,000 tons. As of November 30, the actual release volume was 265,500 tons, and the transaction volume was 176,800 tons. The average transaction volume The rate is 66.59%.
“The release of cotton reserves is intended to ensure effective supply in the domestic cotton spot market, stabilize cotton market prices, and provide more alternative cotton resources for downstream textile companies.” Cui Jiayue, an agricultural product analyst at Green Dahua Futures, told reporters that due to the recent domestic cotton futures spot Prices have fallen sharply, and short-term market fluctuations have been relatively violent. Suspending the release of reserve cotton at an appropriate time will help stabilize market panic and calm irrational fluctuations in market prices.
Regarding the recent continuous decline in cotton futures prices, Cui Jiayue believes that this is mainly affected by the panic in the financial market caused by the new coronavirus mutant strain in the external market. It is an event-driven decline, which is sudden, short-term and violent. The short-term characteristics of the decline in domestic cotton futures driven by this are more direct. Judging from the changes in Zheng cotton futures positions, futures prices have shown a trend of reducing positions and rebounding, indicating that market shorts do not have high expectations for short-term decline targets. On the contrary, Actively close positions on dips, leading to a rebound.
However, some people in the industry believe that in the past two months, downstream textile operations have been struggling, with orders reduced, prices sluggish, and inventories rising. However, due to high costs in the early spot market, cotton prices have not fallen back. The recent mutant strain of the new crown virus in South Africa has caused market concerns. As a result, cotton prices eventually fell rapidly.
Looking forward to the market outlook, Cui Jiayue believes that from the perspective of cotton spot market prices, the current domestic cotton spot purchase price has declined compared with the previous period. As of November 30, the purchase price of Xinjiang machine-picked cotton seed cotton was 9.1 yuan/kg, and the cost support is stronger than the previous period. It has weakened somewhat, but still cannot be ignored. At the same time, the domestic cotton futures spot basis is still at a high level, which will restrain the scope for futures prices to fall. From the perspective of supply and demand in the domestic cotton market, domestic cotton production in 2021/2022 will decline significantly year-on-year, the gap between domestic production and demand will expand, dependence on imports will increase, and the overall supply and demand situation will be positive. At the same time, after the State Reserve rotated out and released two batches of central reserve cotton from July to September, the State Reserve inventory is expected to decline, and there is a potential benefit of replenishment. “It is expected that there will be limited room for cotton futures prices to fall in the future. After squeezing out a certain amount of bubble components, it is more likely that futures prices will return to range-bound oscillations, but the center of gravity of the oscillations will likely shift downwards from the previous period.”
The above-mentioned industry insiders said that judging from the terminal inventory of the global textile industry chain, although the restocking has been obvious this year, there has not yet been a high inventory. If the economy does not decline significantly, global demand may continue to exceed supply, and the value of cotton in the future is expected.
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