USDA'S October Supply And Demand Report Was Negative

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After the national day, the domestic cotton futures 2301 contract rose continuously, once close to 14000 yuan / ton. However, USDA's October supply and demand report released by USDA on Thursday was obviously negative. Ice cotton fell by more than 5% for two consecutive days, and domestic cotton recovered some of its gains. At present, cotton has not yet formed an obvious upward trend. In the global macro situation is not optimistic and the cotton harvest of China and the United States, it is difficult for cotton to continue to rebound.

Affected by the Xinguan epidemic and other factors, cotton transportation has been slow in recent years. In addition, some cotton trading enterprises are reluctant to sell, and the spot price keeps rising. The 328 grade cotton index rebounds to 15740 yuan / ton, and the basis difference with cf2211 contract is as high as 1300 yuan / ton. The cotton futures price is supported, and the long-term contract rises significantly.

However, the strength of spot price is difficult to sustain. With the listing of some new cotton in the mainland and the recovery of cotton transportation in Xinjiang, it will be sooner or later that the price will fall down under the weak demand.

After a bitter harvest of seed cotton last year, most ginning plants in Northern Xinjiang set the purchase price of cotton below 5.5 yuan / kg, equivalent to about 12500 yuan / ton of lint cost. However, most farmers are in the wait-and-see stage, and only seed cotton is delivered without settlement; Some cotton ginning enterprises in southern Xinjiang raised the purchase price to 6 yuan / kg, the lint cost increased to 13500 yuan / ton, and the lowest price difference with cf2301 contract was - 400 yuan / ton. It is completely possible to register new cotton as warehouse receipt, add cotton premium, and safely lock in profits of more than 1000 yuan / ton.

If the futures price continues to rise, the ginning plant can appropriately raise the purchase price, process as usual, and continue to hedge on the futures.