At present, the cotton industry is operating in a pattern of high inventory, high prices, and weak consumption, and corporate operating risks have increased. In order to promote the quality and efficiency of the cotton industry and effectively respond to the risk of price fluctuations, from May 16th to 17th, Zhengzhou Commodity Exchange, in conjunction with the Xinjiang Production and Construction Corps Supply and Marketing Cooperative and the Xinjiang Securities Regulatory Bureau, held an online “Escort Entity for Stabilizing Enterprises and Agricultural Development – Xinjiang” (Corps) Cotton Industry Risk Management Forum”. At the meeting, representatives from futures and cash companies focused on the domestic and international economic situation, the current status and development trends of the cotton industry, and shared the risk management model that combines futures and cash. Ginning companies, traders, warehousing companies, downstream textile companies, cotton planting cooperatives, etc. Cotton enterprises and entities participated in the meeting.
Xinjiang is the core production area for cotton, red dates and other listed futures products. Among them, Xinjiang’s cotton output accounts for 89.5% of the country’s total output. About 50% of farmers in Xinjiang grow cotton. The number of cotton farmers exceeds 7 million. The total output value of seed cotton is about 100 billion yuan, accounting for about 40% of Xinjiang’s primary industry. .
Ma Lin, member of the Party Committee and Deputy Director of the Xinjiang Production and Construction Corps Supply and Marketing Cooperative Federation, introduced at the meeting that since 2021, domestic cotton prices have reached a nearly 10-year high, and the downstream demand for the industry is seriously insufficient. >Lint cottonThe sales progress is slow. As the main cotton producing area, Xinjiang Production and Construction Corps, the inventory of cotton trading companies remains high and the financial pressure is high. The development of the cotton industry has encountered challenges.
“In 2021, the XPCC’s cotton sowing area is about 13 million acres, and the lint yield is 2.08 million tons. Cottonquality has been comprehensively improved, with five items including average length and micronaire value The indicators rank first in the country, among which the average length and uniformity exceed the US cotton and Australian cotton. However, the sales situation of the XPCC cotton market in 2021 is not optimistic.” Ma Lin said that due to the impact of both cost and demand, in 2021 The sales progress of lint cotton in XPCC is slow and the inventory remains high. From a cost perspective, the cost of lint cotton in northern Xinjiang is about 25,500 yuan/ton, and the cost of lint cotton in southern Xinjiang is about 24,500 yuan/ton, which are both highs in the past 10 years, forming an unfavorable situation in which lint costs and sales prices are inverted. From the demand side, firstly, affected by the economic environment, most textile companies adopt a low-inventory operation method of buying as they go when using raw materials, and lint procurement has dropped significantly compared with previous years. Second, due to factors such as the epidemic, the inventory of finished products in the textile industry has been slowly digested. More and more textile companies have avoided risks by limiting production and switching production, and the demand for raw materials has been lower than before.
In a market landscape where high prices, high costs, high inventories, and weak consumption coexist, it is particularly important to use market-oriented means to help industrial enterprises cope with risks and stabilize production, supply, and prices.
It is understood that the function of cotton futures has been effective. In 2021, the correlation coefficient between future and current cotton prices reached 0.99, effectively performing the price discovery function. At the same time, the capabilities of cotton futures service entities have been steadily improved. Cotton-related companies actively use cotton futures to manage risks. In 2021, the average daily positions of cotton futures corporate customers increased by 14.46% year-on-year, and the hedging efficiency reached 93.5%. Basis trade and rights-inclusive trade have become the mainstream purchasing and selling models. Cotton companies have a strong influence on the futures market. Recognition and participation are increasing day by day.
This year, Zhengzhou Commodity Exchange has newly added Xinjiang Alar Pengyu and Jiangsu Zhangjiagang Foreign Service as cotton futures delivery warehouses. The number of cotton futures delivery warehouses nationwide has reached 25, including 10 in Xinjiang, providing more adequate delivery services. As of the end of April, the registered volume of cotton warehouse receipts for 2021/2022 reached 852,600 tons, broadening the sales channels of cotton companies.
The Zhengzhou Commodity Exchange’s over-the-counter comprehensive business platform has also made new progress. On the one hand, it has innovated the “platform + leader” business model and launched a special area for purchasing and selling cotton warehouse receipts, helping China Cotton Group sell 2,402 tons of cotton in the form of basis trading. Further support the steady development of cotton industry enterprises. On the other hand, the cotton standard warehouse receipt buyout business continued to expand, providing 29 cotton companies with financing of 6.29 billion yuan, reducing the financing costs of cotton companies.
In addition, the cotton “insurance + futures” project continues to advance. In 2021, two cotton “insurance + futures” projects were launched in Xinjiang Maigaiti and the 53rd Regiment of the 3rd Division of the Xinjiang Production and Construction Corps, investing 16.85 million yuan in premiums to protect the “price” of 19,200 tons of cotton produced by 8,461 cotton farmers.
In recent years, the Xinjiang Securities Regulatory Bureau, together with Zhengzhou Commercial Exchange, Xinjiang Uygur Autonomous Region and Xinjiang Production and Construction Corps, have carried out a lot of work in cultivating the futures market, educating investors, and assisting corporate risk management in the jurisdiction. The jurisdiction has participated in futures The level of the market has been improved and certain results have been achieved.
“Since the Zhengzhou Commodity Exchange adjusted the cotton futures delivery base to Xinjiang in September 2017, the number of registered warehouse receipts for cotton futures delivery warehouses in Xinjiang has increased year by year, and the proportion of Xinjiang cotton in the total number of warehouse receipts has remained at 95%. It has strengthened the role of Xinjiang cotton price benchmark.” said Zhao Peng, deputy director of Xinjiang Securities Regulatory Bureau.
The relevant person in charge of the Zhengzhou Commercial Exchange said that in the future, the Zhengzhou Commercial Exchange will continue to take active actions, taking the construction, development and maintenance of the cotton futures market as the starting point and goal, and unswervingly promote the high-quality development of the cotton industry. First, adhere to the general tone of “keeping stability at the forefront and seeking progress while maintaining stability” and continue to strengthen cotton futures market supervision.�, ensure the stable and healthy operation of the market, serve the overall national macro-control situation, and serve the national policy of ensuring supply and stabilizing prices. The second is to strive to promote the construction of cotton textile futures varieties, promote the listing of relevant futures varieties, and research and improve cotton yarn and other listed varieties futures rules, and strive to create a textile futures variety system with coordinated linkage of cotton, cotton yarn, PTA, and short fiber. The third is to actively promote opening up to the outside world, study and demonstrate international cotton futures, and steadily and prudently promote QFII and RQFII participation in futures. The fourth is to continue to strengthen market services, increase business knowledge training on the futures and options market and over-the-counter business platforms, and help the majority of entities to make better use of the market to carry out hedging and other businesses.
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