Will Cotton Prices Continue To Rise?

Recently, the overall cotton market began to be interesting. The lint price oscillation is rising, futures are rising, and seed cotton purchase prices are rising simultaneously. The spring of cotton city seems to be coming. In November 5th, a Hengshui market insider asked the author how to view the current market and how to operate it as a takeover company.

First of all, I believe that the price of seed cotton is still at a historical low. First look at futures, after the national day, Zheng cotton oscillation rises, in November 4th, the main contract CF2001 closed 12980 yuan / ton, the total rise of nearly 1000 yuan / ton. But compared with the same period last year, it is still lower than 1500 yuan / ton. Look at the lint spot now. In November 5th, the sale price of lint cotton in Hebei was 13000-13100 yuan / ton, 1300 yuan / ton lower than the quality cotton price compared with the same period last year, which is nearly 2500 yuan / ton lower than the 2018 high price point. Looking at seed cotton, the purchase price of seed cotton is also low this year. On the 5 day, the picking price of Akesu, Kashi and other places in Xinjiang was 6.1-6.3 yuan / kg (lint 42%, moisture regain 10%), and the price of machine picked cotton was 5.4-5.6 yuan / kg, down 1.0-1.2 yuan / kg compared with the same period in 2018. On the whole, the price of cotton seed or lint price this year is much lower than that of 2018.

Second, the cotton market has rising elements. For example, cottonseed prices are rising steadily. In November 5th, the price of cottonseed rose to 1.85 yuan / kg in southern Xinjiang, and the price of cottonseed in mainland Hebei and Shandong reached 2.3 yuan / kg, up 0.05 yuan / kg compared with the previous week. According to the head of the cotton mill, cottonseed rose or dropped by 0.01 yuan per catty, and the lint cost increased accordingly or decreased by 30-35 yuan / ton. Therefore, the rising price of cottonseed has played a good role in promoting seed cotton prices.

In addition, the replenishment of textile mills has begun. From 2019 to September 30th, most of the small and medium-sized textile mills had 30-40 days of raw material storage and 60 days of storage. Therefore, in the early November, many small and medium-sized textile mill raw materials inventory has dropped to a low point, it is urgent to replenishment. Even the textile factories with large inventory of raw materials also need replenishment.

To sum up, the author has a rising trend in view of the recent market. With the increase of demand for replenishment of textile mills, new cotton will gradually enter the market. In addition, the Sino US trade dispute is also easing up, which will create conditions for the recovery of cotton from the bottom of the Valley this year.

However, we should also see the negative factors. First, there is no obvious improvement in downstream consumption. According to the introduction of the Yellow River basin textile mill, although the order of regular yarn has picked up, the problem of small orders, short and short is still outstanding, which will bring resistance to the normal recovery of cotton prices. Two is the impact of external cotton, the United States Department of Agriculture released in November 4th the United States cotton production report shows that as of November 3, 2019, the United States cotton harvest progress was 53%, an increase of 5 percentage points over the same period last year, an increase of 3 percentage points over the same period in the past five years. With the advent of new cotton in the United States, it will bring greater pressure to domestic cotton. Three, Xinjiang cotton will be listed centrally. Data show that Xinjiang cotton production is expected to be around 5 million tons this year. As the picking is coming to an end, the new cotton will be listed in late November, which will also bring a lot of pressure to the spot price. (Zhang Jiangbo)