In the past more than a month, cotton futures have been unable to get out of the obvious unilateral market and have been fluctuating widely around 17,500.
Domestic new cotton picking has begun, what is the reference significance of the higher sporadic open scale prices? How do you view the increase in daily input of cotton reserves and restrictions on the participation of non-textile companies? In the downstream market, are the characteristics of the traditional peak season of Gold, Nine and Silver Ten obvious? Zheng Mian surged higher and fell back into adjustment. How do you view the later direction choice?
Institutional consultation
Domestic new cotton picking has begun, and relatively What is the reference significance of high sporadic opening scale prices? How do you view the cost of new flowers?
[Xu Liang, Manager of the Agricultural Products Department of Shanghai East Asia Futures Research Institute]: Domestic new cotton is currently on the market sporadically and in small quantities. It is of little reference significance. In the later period, the main focus will be on the price of machine-picked cotton. At present, the cost of new cotton is relatively high, but the state has been subsidizing the purchase of cotton in Xinjiang at a price of 18,600, so the cost of cotton cultivation is of little significance in guiding prices.
[CITIC Futures Wu Xinyang]: Judging from the harvesting habits of cotton farmers, hand-picked cotton must be picked in batches according to the morning and evening when the upper, middle and lower layers of cotton bolls are spun, while machine picking Cotton will be harvested with a cotton picker after the whole cotton plant has been spun out. Therefore, hand-picked cotton is the first to be put on the market, while machine-picked cotton will be put on the market in large quantities from late September to mid-November. As we all know, domestic cotton cultivation is now basically concentrated in Xinjiang, and with the large-scale promotion of mechanical harvesting in Xinjiang, the mainstream should focus on machine-picked cotton, rather than the current sporadic hand-picked cotton, so it does not have much reference significance for the market.
But we can notice that the price of hand-picked cotton on the sporadic market is generally higher than 10 yuan per kilogram, and some are even close to 13 yuan. Behind this is more of a reflection of the expected harvest in the seed cotton market this year. However, it is questionable whether the cotton market driven by the rush to harvest by large cotton merchants in October last year will repeat itself this year.
The reasons for the high price of seed cotton are mainly based on three points: 1. Overcapacity of ginners and tight supply and demand of seed cotton; 2. Increase in planting costs for cotton farmers; 3. Expectations of production cuts lead to the existence of cotton farmers The output value per mu has lowered expectations, and it is hoped that high cotton prices will make up for the losses. However, judging from the actual situation, the overcapacity of ginning plants has already appeared last year. The government has not approved the launch of new production capacity this year. At the same time, the production reduction expectations have also decreased from the planting period to the present. According to the latest research report of the China Cotton Association, Xinjiang’s unit yield is expected to be year-on-year. increased by 1.11%. From a rational perspective, the production reduction expectations among these three points are facing falsification, while the other two points have been priced in by high-seed cotton prices.
[Chang’an Futures Wei Pei]: As the new cotton picking begins, some areas have begun to quote sporadic opening weighing prices. Looking at this year, the opening weighing prices of hand-picked cotton It has risen from 8.8 to about 9.5 yuan/kg, and the highest this week has risen to 10.6 yuan/kg. The price of machine-picked cotton is 8.6-9 yuan/kg, an increase of about 2-2.5 yuan/kg compared with last year. The cost of lint is high. The increase has been confirmed.
The rising cost of new flowers is partly due to the sharp increase in the cost of cotton cultivation. In recent years, with the reduction in the supply of land, water resources, labor, etc. in Xinjiang, the degree of mechanization has also increased. The cost of cotton planting has increased rapidly. Especially this year, pesticides and fertilizers, mulch films, water fees, land transfer fees, etc. have all increased, causing the cost of cotton planting in some areas of Xinjiang to reach about 2,500 yuan/mu. On the other hand, due to the continued rise in the market price of seed cotton last year, the production capacity of ginners has increased significantly this year, intensifying the enthusiasm for cotton.
Institutional consultation
How to view the increase in the daily amount of reserved cotton and the restriction of non-textile enterprises from participating ? How is the recent stock-selling transaction situation?
[Xu Liang, manager of the agricultural products department of Shanghai East Asia Futures Research Institute]: The current state reserve auction is mainly to meet domestic textile demand. The recent transactions are still 100% completed, and the market is worried about future supply. The sales of state-owned cotton have been booming. However, the transaction price has recently weakened and returned to normal levels. The previous transactions as high as 18,000 were full of speculation. The current return to around 17,000 is a price range acceptable to the downstream.
[CITIC Futures Wu Xinyang]: Prohibiting trading companies from participating in auctions and increasing daily inputs are regulatory measures that have suppressed the previous higher growth in cotton. More hope for the industrial chain Balanced development of upstream and downstream to avoid abnormal profit distribution. Recent transactions have maintained 100%, but the price has been reduced.
[Chang’an Futures Wei Pei]: Recently, on the one hand, China Cotton Reserve has continued to increase sales of reserves. On the other hand, at the end of August, China Reserve Cotton announced that reserve cotton rotation transactions are limited to textiles. Cotton-using enterprises are prohibited from participating in the bidding, and non-textile cotton-using enterprises are prohibited from participating in the bidding, and textile cotton-using enterprises are not allowed to resell. In addition, the Zhengzhou Commodity Exchange’s margin ratio for cotton futures has also increased. This shows that after cotton prices continue to reach high levels, the policy side’s willingness to regulate has increased. If prices rise again later, import quotas may continue to be released to curb cotton price increases.
All the recent reserve cotton rounds have been sold. Enterprises are very enthusiastic about bidding, but the sales floor price has dropped. From July 5 to September 16, the cumulative transaction volume was 560,525.037 tons. The transaction rate is 100%. The average transaction price on September 16 was 17,027 yuan/ton, a weekly decrease of 243 yuan/ton.
Institutional consultation
In the downstream market, are the characteristics of the traditional peak seasons of the Golden Nine and Silver Ten obvious? How is the start-up situation of textile enterprises?
[Shanghai East Asia Futures Research Institute Agricultural Products DepartmentManager Xu Liang]: The current demand is weakening, and the seasonal demand peak season still exists. The demand for gold, September, and silver ten still increases month-on-month, but the magnitude is not large. Textiles and apparel are currently in a normal situation, and the situation like the transfer of orders from Southeast Asia last year has not occurred this year. The overall downstream export situation did not exceed expectations.
[CITIC Futures Wu Xinyang]: Not obvious. I think downstream focuses on two aspects: 1. Domestic clothing consumption has fallen into a growth bottleneck. China is the country with the most effective epidemic prevention and control in the world, and consumption should be the most worth looking forward to. However, the clothing sales in July and August are not optimistic. 2. Orders in the European and American markets may be pre-ordered due to the shortage of containers, so the early feedback shows that the off-season is not weak, and the gold, nine and silver ten are very likely to be slow in the peak season. Downstream startups have declined due to power restrictions and low profits.
[Chang’an Futures Wei Pei]: This year, the downstream market is not prosperous in the peak season due to the front-loading of some orders in July and the pressure on the global economy and the downturn in consumer goods in the second half of the year. Enterprises have received new orders. Orders fell short of expectations, and the “Golden Nine and Silver Ten” characteristics were not obvious.
Judging from the start-up situation of textile enterprises, due to the recent shortage of orders and the “double reduction” in Nantong, Jiangsu Province, the overall start-up of textile enterprises has dropped to about 50%.
Institutional consultation
Zheng Mian fell into adjustment after rising high. How do you view the later direction choice?
[Xu Liang, Manager of the Agricultural Products Department of Shanghai East Asia Futures Research Institute]: Zheng Cotton continues to be bullish in the long term, due to the current low inventory after the state reserve cotton auction and the lack of control measures. The domestic gap is as high as 3 million tons, and we must rely on imports. Domestic quotas will need to be issued later to meet domestic demand. It is only a matter of time before demand recovers after the epidemic. Therefore, there is a large safety margin for going long near 17,000 at present. Maintain a bullish view in the long term.
[CITIC Futures Wu Xinyang]: I personally believe that when a product enters a period of high volatility, positions are likely to be troubled by sharp shocks and washouts, and the fundamentals do not see a bullish bias. Or a significant driver on the bearish side. The speculative value of Zheng Mian has decreased, and the short position option is more reasonable.
[Chang’an Futures Wei Pei]: Regarding the market outlook, from the perspective of economic growth and demand alone, cotton may face certain macroeconomic pressure. The core driver of high U.S. cotton consumption in the later period is China, but Chinese consumption also faces certain growth bottlenecks under economic pressure. In terms of Zheng cotton, we believe that the market has realized the reality of the rise in seed cotton prices this year. After the new cotton is launched, whether cotton can continue to rise mainly depends on the cooperation of the demand side. Since cotton demand and economic growth are highly correlated, later consumption The reality of a weakening economy may gradually put pressure on prices. </p
