Yesterday, ICE US cotton futures fell more than 1%, the lowest level in more than a month, mainly due to concerns about the Sino-US trade agreement. ICE’s main March cotton contract closed down 1.07 cents, or 1.6%, with a settlement price of 64.28 cents/pound, the largest percentage drop in more than a month. Today, Zheng Cotton’s main CF2001 contract continued to fall at the opening, reaching a low of 12,580 yuan/ton, and short positions increased significantly. Industry insiders speculate that the recent decline in domestic and foreign cotton futures may be due to the Sino-US trade negotiations once again encountering obstacles. Relevant foreign media sources said that the completion of the first phase of the Sino-US trade agreement may be postponed until next year.
Cotton futures prices have fallen again, bringing more benefits to ginning companies that are currently processing cotton in full swing. for a direct blow. This year, the price of seed cotton has started at a low level and then moved up, and the processing costs of enterprises have also continued to increase. However, most of the newly processed lint cotton is still on the way to be processed, or is still in professional warehouses. As the sale of seed cotton comes to an end, the processing costs of ginners have solidified, futures prices have fallen, and the lint market price will follow closely, which will undoubtedly increase the pressure on enterprises.
According to feedback from Xinjiang cotton gins, the main production area, the processing costs of enterprises this year vary greatly. Generally speaking, the early processing costs of enterprises that open scales are relatively large, and the early processing costs of machine-picked cotton in North Xinjiang are relatively large. The average processing cost is 11,200-11,500 yuan/ton, and the later processing cost rises to 12,800-13,200 yuan/ton. After the hand-picked cotton in southern Xinjiang was put on the market, the price fluctuated little, and the average processing cost was 12,600-13,500 yuan/ton. Due to some companies It is a contracting type, with different capital costs and different processing costs. However, most companies said that the current downstream demand is not strong, the spot price of new cotton is difficult to sell, and the futures price is at a discount to the spot price. It is difficult to eliminate concerns about the market outlook.
In addition to pure price factors, the quality of newly processed lint cotton in Xinjiang this year is generally not as good as last year, which also brings difficulties to cotton sales. Enterprises in Kuitun, Jinghe and other areas of northern Xinjiang have reported that the proportion of resources above Double 29 this year has significantly decreased, perhaps due to the low temperature in the early stages of cotton growth and the excessively high summer temperatures. In addition to the Bazhou area in southern Xinjiang, the feedback from the Aksu area and Kashgar is not very optimistic. In addition to the length and strength, the length and strength are generally not as good as last year, and the horse value is high, which seriously affects the lint index. The person in charge of a company in the Yuepu Lake area of Kashgar said that in previous years, 29mm length accounted for a large proportion, but this year basically all resources are 28mm. Whether it is stored later or sold in stock, there will be a substantial quality discount, and the income will definitely decrease.
As of November 20, a total of 2.88 million tons of new cotton have been processed nationwide and 2.33 million tons have been inspected. New cotton supply pressure may gradually appear. The progress of Sino-US trade is still the dominant factor affecting the current direction of the cotton market. With limited digestion of downstream cotton and a decline in the quality of some new cotton, how ginners can resist risks and safely weather market fluctuations has become the key. In the market outlook, it may be a good strategy for cotton production companies to lock in appropriate profits and not blindly pursue high prices. They can promptly choose to withdraw funds through storage, spot sales, price points, or hedging and other methods. </p
