Market Dynamics: Stop The Release Of Reserve Cotton Xinjiang Cotton Harvest Work Ended Smoothly

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Recently, the cotton price has remained weak and downward. After the sale of reserve cotton stopped on the 15th, the fluctuation range of cotton price narrowed. According to the commodity market analysis system, the spot price of 3128B lint on November 20th was 16882 yuan/ton, with a weekly decline of 0.59%, down 1.66% from the beginning of the month.

Domestic cotton market: according to the Department of Agriculture and Rural Affairs of Xinjiang Uygur Autonomous Region, the cotton harvest in Xinjiang in 2023 will be successfully concluded, with the harvest progress reaching more than 99%, and the total cotton output is expected to be stable at more than 5 million tons. Since November, the average purchase price of seed cotton in Xinjiang has fluctuated. As of 19, the average purchase price of machine picked cotton was about 7.2 yuan/kg, and the average purchase price of hand picked cotton was about 7.8 yuan/kg.

In October, the total commercial inventory of cotton nationwide was 2.4052 million tons, an increase of 1.0906 million tons month on month and 84900 tons year on year. Currently, it is in the stage of new flower listing, and the total commercial inventory continues to increase. The supply of foreign cotton and imported cotton continued to increase. In October, China imported 290000 tons of cotton, with a month on month increase of 20.8% and a year-on-year increase of 122.1%. The supply side maintains a loose state, and textile enterprises are not willing to supplement stocks.

China Reserve Cotton Management Co., Ltd. announced on November 14, 2023 that it would stop the sales of 2023 central reserve cotton from November 15, 2023. From July 31 to September 1, the daily rotation output of reserve cotton was about 10000-12000 tons, and then on September 14, the daily rotation output of reserve cotton was increased to 20000 tons, ensuring the supply of cotton market. From July 31, 2023 to November 14, 2023, the accumulated listed reserve cotton is 1.2321 million tons, and the turnover is 884700 tons, with a turnover rate of 71.81%. The weighted average transaction price is 17424 yuan/ton, which is converted into 3128B weighted average price of 17927 yuan/ton.

The stop of rotation of reserve cotton has a certain impact on the market in the short term. Zheng Mian rose slightly on that day, but considering that the market has expectations for the stop of rotation of reserve cotton, it has little impact on the market in the long term, and the spot performance is relatively calm. The stop of dumping and storage has reduced the supply pressure to a certain extent, but at present, a large number of imported cotton and new cotton are on the market, and the supply is still sufficient. At present, textile enterprises are not very enthusiastic about purchasing cotton, and lack confidence in the future market. In the long run, the suspension of rotation has little impact on the market, which will be gradually diluted over time.

International cotton market: As of the week of November 9, the net contracted export volume of American upland cotton in 2023/24 was 74500 tons, 17% less than the previous week, but still at a relatively high level; The shipment volume was 25600 tons, an increase of 25% over the previous week. The weekly report of US cotton export is still positive. Under the macro improvement, the US cotton market has returned to more than 80 cents/pound due to China's stop of reserve cotton sales. As of the 17th, the main contract settlement price of ICE cotton was 81.51 cents/pound.

In terms of downstream demand: the downstream market still maintains a light atmosphere, and some low price goods are sold at a higher volume, which makes it difficult to clinch a deal. The disordered quotation of yarn enterprises, the high inventory of cotton yarn and the weak demand of downstream are the important reasons for the price of pressed yarn. By the end of October, the total commercial inventory of domestic cotton yarn had reached 1.277 million tons, an increase of 530000 tons over the same period of last year, or 70.95%, the highest in nearly six years. The transaction atmosphere of grey cloth market continued to be light, the orders of small and medium-sized factories were insufficient, and the downstream inquiry phenomenon was reduced. The startup load of textile enterprises continued to decline. According to the survey of the national cotton market monitoring system, the startup rate of textile enterprises sampled in early November was 83.4%, down 9.3 percentage points month on month; The production and marketing rate of enterprises was 96.3%, down 3 percentage points month on month.

Future forecast: From the perspective of the industrial chain, despite the favorable supply side support such as the production reduction in the new year and the stop of dumping and storage of intermediate storage cotton, cotton prices remain weak, and insufficient demand is becoming the main factor limiting cotton prices. At present, the downstream market trading and investment continue to be light, the inventory of finished products in the industrial chain is accelerating, the reduction and shutdown of textile mills and yarn mills are increasing, the start-up of enterprises continues to decline, and the market sentiment is pessimistic. At present, the global textile and clothing industry is still in a downturn, and short-term cotton prices will remain weak under demand side pressure.