According to relevant media reports, at 2 a.m. this Thursday, the Federal Reserve will announce its latest interest rate decision. The market generally expects that the Federal Reserve will take action to “wind down bond purchases” this time and is expected to reduce its monthly bond purchase plan of US$120 billion. In the minutes of the September monetary policy meeting previously released by the Federal Reserve, it was stated that it may start to reduce the scale of asset purchases from mid-November or mid-December. Therefore, this meeting is also called “the most important Fed meeting of the year.”
ICE cotton futures fell back after rising last night, with the December 2021 contract closing at 117.25 cents/lb, down 2.59 cents/lb. Some market participants believe that this is not only related to the strength of the US dollar, but also to the approach of the interest rate meeting and the flight of some long funds to avoid risks. The price of US cotton futures fell back, and the main price of Zheng cotton futures also fell again, falling to a low of around 21,200 yuan/ton. Futures prices have fallen, and the market basis price and spot price/performance ratio has improved. However, there has been no significant improvement from the actual transaction point of view, reflecting that the current demand from downstream spinning enterprises is not ideal and the spot circulation is not smooth.
Into November, the price of seed cotton in Xinjiang has maintained a stable but weak trend. The price of machine-picked cotton is basically 9.9-10.2 yuan/kg, and the price of hand-picked cotton is 11.3-11.6 yuan/kg. Kilogram. The cotton harvest in northern Xinjiang has entered the final period, and some ginning companies have begun to actively seek shipping opportunities while processing lint cotton. However, judging from the current average cost of lint cotton in Northern Xinjiang, there is still a lack of suitable profit margins. As seed cotton opens higher and moves lower, the processing costs of ginning companies in southern Xinjiang are relatively low. Recently, according to feedback from a company in Korla, the cost of purchasing seed cotton at 10 yuan/kg is about 23,000 yuan/ton. If the price of seed cotton can be reduced to 9.5 yuan/kg later, the cost of lint cotton can be reduced by about 1,200 yuan/ton. Lint cotton is now difficult to sell, mainly due to the lack of consumer demand from downstream cotton textile mills. As long as futures provide suitable hedging opportunities in the future, many companies will definitely actively ship goods.
Most companies are not very optimistic about the trend of cotton prices this week. On the one hand, the Federal Reserve’s interest rate meeting will put pressure on the entire commodity market. On the other hand, the demand in the textile market is difficult. Rapid improvement, and upstream ginning costs are still declining.
Xinjiang: More companies have stopped buying in northern Xinjiang, while purchase prices in southern Xinjiang have remained stable
In November, more and more companies stopped harvesting in northern Xinjiang. Among them, cotton companies interviewed in Jinghe, Wusu, Hutubi and other places said that the current sales volume in the local cotton market has gradually decreased. Although the price of seed cotton has declined, Some future sources have large impurities, and the lint percentage has dropped significantly. Even the acquisition cost of more than 9 yuan/kg is still very high. In addition, the large amount of seed cotton purchased in the early stage has slowed down the acquisition progress of enterprises, and most of them currently focus on processing and warehousing.
In the southern Xinjiang region, the current purchase price is relatively stable. Although the purchase price of machine-picked cotton in Bazhou and other places is below 10 yuan/kg, the standard-grade machine-picked cotton in Aksu and Kashgar areas The purchase price of cotton remains at 10.3-10.5 yuan/kg. Overall, corporate lint sales are under great pressure. Affected by cost factors, downstream customers are temporarily unable to accept relatively high spot lint quotations. In recent years, most Xinjiang companies have become accustomed to selling at futures prices, and currently can only wait. Hedging opportunities arise.
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