Cotton Futures Prices On The Intercontinental Exchange (Ice) Suffered Two Lower Limits

Recently, the price of cotton futures on the Intercontinental Exchange (ice) encountered two limits. At the same time, the domestic cotton futures market also continued to weaken in the near future.

On September 27, the main contract price of zhengmian 2301 closed at 13450 yuan / ton, with the futures price falling by 125 yuan / ton compared with the previous trading day, reaching a new low in two years. What happened behind it?

Every time cotton prices fall to a low point, or rise to a high level, the market will have investors "can not bear loneliness.". However, the cotton market in 2022 did not change as expected.

In the second quarter of this year, the drought in the main cotton producing areas of the United States continued to aggravate, causing the market's concern about the tight global cotton supply. The international exchange (ice) cotton rose from 90 cents / pound to 133.79 cents / pound, driving the domestic cotton up.

However, the recent US cotton producing areas ushered in a large number of rainfall, drought has been significantly alleviated, which also reduced the enthusiasm of market speculation weather; The US Federal Reserve raised interest rates sharply and the US dollar index reached a new high, which also led to a sharp fall in US cotton prices. In addition, there are other factors disturbing the cotton market.

Although the U.S. cotton production is expected to decrease in the new year, the global cotton production and demand decline, and the final inventory is expected to increase year-on-year; In addition, the current international cotton price valuation is still relatively high, overseas mills spinning profit loss, leading to a decline in mill operating rate, shrinking demand, leading to price difficulties upward.

The U.S. Department of agriculture (USDA) reported a weekly growth rate of 26% in the same period of September 2029, known as USDA's annual growth rate of 26%. This week, the U.S. cotton harvest rate was 15%, the previous week was 11%, the same period last year was 11%, and the five-year average was 14%. In that week, the full boll rate of cotton in the United States was 67%, 59% in the previous week, 58% in the same period last year, and 62% in five years.

The main reason for the decline of US cotton was that the price of cotton was overvalued due to the speculation of drought weather in the early stage, and the weakness of consumption gradually appeared in the later period under the global economic recession. The demand and purchase of textile and clothing as non necessities of life decreased simultaneously. The contracted sales performance of American cotton was general, the export shipment was slow, and the interest rate was increased by the Federal Reserve, and the selling pressure of bulk commodities increased.

From the supply side, although the US and China Cotton abandonment rate is still as high as 43% in the September report issued by USAD, the planting and harvesting area has increased, the yield and the final inventory have increased, and the cotton boll opening rate has reached 67%. It can be said that the yield has been basically finalized, the probability of reduction in the later stage is not large, and the overall supply is relatively abundant.

As of last week, India's national planting area has reached 12.71 million hectares, an increase of 8% year-on-year. Under the large-scale expansion, the yield is expected to be optimistic. Brazil, Australia cotton has been listed for trading, due to the weather is suitable, year-on-year increase. From the demand side, the demand for textiles and clothing in Europe and America is weak, the spinning profits in India and Southeast Asia are in deficit, China's domestic demand is weak, and the global consumption is weak.

In July, US wholesalers' textile and clothing inventory reached US $40.6 billion, an increase of 72% over the same period of last year, reaching a record high, continuing the accumulation trend since August last year; In August, the import amount of textile and clothing was 316 million US dollars, and the import volume decreased significantly, showing an inflection point. Under the energy crisis and high inflation in Europe, textile and clothing demand declined, and import orders decreased by 15% - 20% compared with previous years. Under the high cost and long-term loss, the start-up rate of spinning mills in India, Pakistan and Vietnam has continued to drop to the lowest level in the past years, and the consumption peak season is not prosperous, and the future market is more pessimistic.

According to the forecast of USDA's September report, the global cotton production in 22 / 23 is expected to increase by 600000 tons on a year-on-year basis, the consumption will decrease by 180000 tons, and the inventory consumption will be increased by 0.46%. However, the end of the period inventory and inventory consumption ratio continue to rise.

Since late September, cotton farmers in Xinjiang have been preparing for large-scale cotton picking. Due to the improvement of Agricultural Mechanization in Xinjiang in recent years, the cotton picking in Xinjiang is mainly machine picking cotton. A cotton trader in Xinjiang said that at present, new cotton in the main production area of the mainland has been listed for trading, the northern Xinjiang region has started large-scale machine picking, Bazhou and Aksu regions in southern Xinjiang are expected to start large-scale picking at the end of September, and Kashgar area is expected to start picking after the 11th National Day.

Due to the impact of the epidemic situation in some areas, the purchase time of seed cotton was delayed compared with previous years, and it is expected to start centralized weighing in mid October. Lian Chao also told reporters that the cotton picking cycle is about one month. The whole Xinjiang starts from the end of September to the beginning of November, and the purchasing cycle of ginning plants is 20 days to a month. The mining rate of North Xinjiang is about 90% in 2021; The machine recovery rate of Xinjiang Construction Corps is more than 95%, and the total cotton recovery rate of Xinjiang is more than 85%. The Yellow River and the Yangtze River are mainly hand picked because of their small planting scale and scattered distribution.

At present, there is a big difference between the expected price of cotton farmers and the purchase intention price of ginning plants. Due to the rising cost of fertilizer and land lease this year, the planting cost of self owned land is about 2000 yuan / mu, and the rental cost is 1200 yuan / mu, and the total cost is 3000-3200 yuan / mu; At present, the yield per mu in most cotton areas of Northern Xinjiang is 400 kg, and that in southern Xinjiang is about 360 kg. The average cost per kg is about 7 yuan / kg, and the expected price of cotton farmers is 7.5 yuan / kg. " Lian Chao said.

However, due to the financial pressure and hedging demand, the purchase intention price is 5-6 yuan / kg, which is quite different from the expected value of cotton farmers. The purchase price game may appear in the early stage of weighing. If cotton farmers have been raising prices to extend the time of cotton acquisition or cotton ginning plant low-cost acquisition is successful, and then expand the scale of acquisition under the increase of profit margin, it is inevitable that seed cotton prices will rise. Therefore, the final results still need to be concerned.

On September 26, the average price of 3128 lint cotton arriving at the factory was 15817 yuan / ton, down 60 yuan / ton; The mainstream quotation of 32S pure cotton ring spinning in China was 24445 yuan / ton, down 305 yuan / ton; The spinning profit was 2046.3 yuan / ton, decreased by 239 yuan / ton. The main cotton futures fluctuated at a low level. The merchants were in a strong wait-and-see mood. Some cotton spot prices were higher. The textile enterprises were cautious in purchasing, and the spinning immediate profit was positive.

For the later price trend, Lian Chao said that the main factor influencing cotton prices in China next was the purchase price of Kaiping. From the basic point of view, the current domestic consumption is in the peak season, but the improvement of demand is limited, which is weaker than in previous years; The old cotton carry over inventory was higher, and the new cotton increased; In the later period, under the background of repeated domestic epidemic situation and economic weakness, the improvement of consumption was limited or took a long time, while the ginning plants that decided the cost of purchasing and processing new cotton had low purchasing enthusiasm and strong willingness to lower prices. Therefore, there was still room for cotton prices to be listed in the centralized market.

Cotton demand is greatly affected by economic growth. Due to the slowdown of global economic growth this year, the demand for cotton has also shrunk. This can be seen from the decline in the year-on-year growth rate of textile and clothing exports in Southeast Asia and China, and the accumulation of clothing inventory of American wholesalers. In the fourth quarter, cotton prices may still have downward risks. The output in the new year is increasing and the current inventory is high. Although the demand has entered the peak season, it is difficult to resist the actual pressure. The expected low purchase price of seed cotton may drive down the price of cotton.