On Wednesday (April 28), ICE U.S. cotton futures rose sharply. The main July contract exceeded 90 cents/pound, hitting the highest point since March. The settlement closed at 91.42 cents/pound, mainly affected by the Chicago Board of Trade. (CBOT) Corn, wheat and soybean futures rose strongly, driven by the long-term drought problem in the cotton-growing areas of Texas in the United States that cannot be alleviated. At the same time, the slow progress of cotton planting in the United States has also increased the market’s concerns about this year’s planting.
The strong performance of external futures has increased the spot cost of imported cotton purchased through basis difference and reduced the enthusiasm of some importers for pre-purchase. Domestic futures prices have risen simultaneously, forcing some textile companies to give up their hope of “buying the bottom” and increase the volume of cotton spot orders. Judging from the inquiry status of textile enterprises around Qingdao Port and Zhangjiagang, although the demand is mainly for replenishment of inventory, the procurement scale and frequency are significantly higher than those in the mid-to-early period. A textile company in Shandong said that clothing orders have increased slightly recently, including some foreign trade orders and some domestic orders. The orders received by each company vary greatly, mainly due to product attributes and sales regions.
The rise in external futures prices has also boosted the confidence of port cotton-related enterprises, and they have a firm attitude towards raising prices. Recently, the main sales categories are Brazilian cotton and US cotton. Among them, the basis difference of Brazilian cotton spot benchmark 2109 contract is 800-1,000 yuan/ton, and the basis difference of US cotton is 1,000-1,300 yuan/ton.
Some importers said that the current port inventory is relatively high. Under the overall bullish atmosphere, most companies are not eager to ship goods. On the one hand, they are banking on the expansion of operating profit margins in the future. ; On the other hand, if additional issuance of sliding tax quotas will stimulate downstream purchasing enthusiasm, all that is needed to destock is to wait for the “east wind” to arrive. Therefore, no matter how much the futures rise in the near future, the spot sales basis will basically not be adjusted and will increase in step with it.
In addition, yarn prices have continued to rise recently, which has alleviated the pressure on textile companies from rising raw material prices and has also promoted companies to increase their inquiries to a certain extent. Some companies said that the quality of Xinjiang cotton declined last year. In order to rationally allocate cotton, increasing the amount of high-quality imported cotton also played a boosting role in the transaction. </p
