Market Analysis: Domestic Cotton Market Short-Term Supply And Demand Mismatch

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Due to the recent escalation of epidemic prevention and control in Xinjiang, limited personnel flow, ginning plants can not cross regional purchase of seed cotton, seed cotton sales progress is slow. In addition, the mainland cotton public inspection personnel are not in place, some warehouses in the territory have not yet opened, and the new cotton warehousing and public inspection procedures are limited.

In 2022 / 23, China's cotton processing enterprises processed cotton according to the requirements of the cotton quality inspection system reform plan and conducted notarial inspection statistics. As of 24:00 on November 17, 2022, the total public inspection of 2706367 bales, a total of 611242.1323 tons, a year-on-year decrease of 73.26%, and the cumulative public inspection volume of Xinjiang cotton was 594848.7249 tons, a year-on-year decrease of 73.76%; Among them, the inspection quantity of serrated fine wool cotton was 2701599 bales, that of roller fine cotton was 0, and that of long staple cotton was 4768. The current cotton public inspection volume is slower than the same period, cotton spot sales are not smooth.

In the near future, the market has seen a significant reduction in bullish cotton. As of November 18, there were 1230 registered warehouse receipts of Zheng Mian, 2 more than the previous trading day, 84 effective forecasts and 37 less than the previous trading day. A total of 1314 warehouse receipts and forecasts, equivalent to 52600 tons of cotton, decreased by 108800 tons or 67.4% compared with the same period in 2021.

The main reasons for the sharp decrease of Zheng cotton warehouse receipts are: first, affected by the upgrading of epidemic prevention and control, the number of new cotton public inspection in Xinjiang was insufficient, and the cotton was not put into the warehouse for public inspection in time, and new warehouse receipts were registered. Second, there is little arbitrage space in the ginning plant. At present, the processing cost of new cotton is about 13000 yuan / ton, and the Zhengzhou cotton futures price is about 13500 yuan / ton. The ginning plant has a small space for arbitrage, so the ginning plant is cautious to wait and see.

At present, the epidemic prevention and control in Xinjiang has been upgraded, and most areas are still in a sealed state, the flow of personnel is limited, and the delivery of cotton by truck is hindered. Due to the shortage of old cotton supply in the mainland market, the firm quotation of traders, and the low raw material inventory of downstream textile enterprises, the demand for just needed replenishment still exists, and there is a mismatch between supply and demand in the short-term cotton market, and cotton prices still have some support.

On the whole, due to the slow progress of new cotton public inspection, ginners failed to participate in futures hedging arbitrage in time, resulting in a significant reduction in the volume of Zheng cotton warehouse orders and the positive mood of the market. In addition, at present, the automobile delivery in Xinjiang is still blocked, the amount of new cotton in Xinjiang is reduced, and the short-term market is short of supply, so Zheng cotton still has some support. However, in the long run, the epidemic prevention and control in Xinjiang was lax, a large number of new cotton were listed on the market, and the market was relaxed, and cotton prices continued to operate under pressure.