The cotton market is in a state of ice and fire. How do all parties respond?

It is understood that the purchase price of seed cotton has been high this year, and cotton farmers have made considerable profits from cotton planting. In early October, cotton prices rose rapidly in Northern Xinjiang, with the purchase price of machine-picked cotton reaching more than 6.9 yuan/kg, and the purchase price of hand-picked cotton in Hami and other places even reaching 8.0 yuan/kg, which was more than 2.0 yuan/kg higher than last year. Xinjiang cotton farmers have been able to reverse two consecutive years of losses in cotton planting. In addition, Xinjiang’s climatic conditions are favorable for cotton growth, so both seed cotton yield and quality are higher than last year. Cotton farmers in Hutubi County, northern Xinjiang, said that this year’s average cotton output per mu has reached more than 300 kilograms. After deducting the physical and chemical costs of cotton planting and labor costs, the average income per mu can reach 500-600 yuan.

However, “it’s too cold to be high”, and the Khmer price situation did not last long. Due to the lack of purchasing support from downstream textile companies, cotton started a downward trend in late October. During this period, the author also received many calls from cotton farmers asking about future cotton price trends. Some cotton farmers said that the current progress of cotton picking and sales in northern Xinjiang has reached more than 60%. The drop in cotton prices at this time will not have much impact on the income of cotton farmers. First, cotton farmers have already sold most of the cotton, and their income is basically locking. Second, due to quality reasons, the price of late-stage flowers is lower than that of early-stage flowers and mid-stage flowers. Therefore, in the later stage of sales, cotton farmers basically follow the market and sell, and there is no reluctance to sell.

When cotton farmers lock in profits, it also means that cotton companies lock in the cost of lint. Although cotton farmers’ income has turned around this year, cotton companies are still suffering. In the past two years, the Xinjiang Corps and local governments have planned to reduce the cotton planting area, while local cotton sorting companies have continued to increase, resulting in an increasingly tight supply of sorting resources. In order to compete for limited resources, raising prices to grab harvests has become their only effective method. This year’s performance has been particularly fierce, and cotton companies have suffered greatly.

Xinjiang cotton enterprises believe that so far, the average purchase price of machine-picked cotton is around 6.5 yuan/kg, which is equivalent to lint cost of 16,000 yuan/ton (conservative statistics), while the price of 3128-grade machine-picked cotton in the North Xinjiang regulatory warehouse is 14,800-15,000 yuan. / ton, even if the selling price and cost are upside down by more than 1,000 yuan / ton, there are few transactions. Mainland cotton textile companies and traders are waiting and watching.

According to the survey, among the companies that raised prices this year to grab sales, a certain proportion of the mainland contracted factories in Xinjiang. In order to achieve the amount of sorting stipulated in the contract, we can only bite the bullet and raise the price to grab the goods, which is exactly what the saying “Kill the enemy by one thousand will cause you to lose eight hundred.”

A cotton enterprise in Hutubi County, northern Xinjiang, said that since it is a self-owned enterprise, the cost of factory losses can be afforded even if it does not start operations. If it is acquired at a loss, the enterprise’s losses will be immeasurable once the decline in cotton prices increases in the future. Therefore, when the market price of cotton is higher than 6.8 yuan/kg, the factory will be required to reduce or stop harvesting. As for the cotton price in the later period, most companies are not optimistic about it.

Compared with the seed cotton purchase market, the lint cotton market is much calmer. Many fabric companies reported that they still have some cotton reserves in stock, which can be used until around mid-November. Since the price of new flowers is relatively high, they are currently taking a wait-and-see attitude.

At present, some trading companies sell reserve cotton and adopt the futures price settlement method. That is, the fabric company pays the full payment plus a certain amount of deposit, and then the purchased cotton can be shipped out of the warehouse for use. Then, according to the different quality indicators of each batch of cotton, the price will be determined accordingly. Add or subtract premiums and discounts for secondary settlement. In this way, it not only facilitates the procurement of fabric companies, but also provides the buyer with a flexible pricing method and a certain initiative.

The enthusiastic seed cotton purchasing market is facing a calm lint purchasing market. This coldness and hotness means that the game between the upstream and downstream of the cotton industry chain has quietly begun. Due to the current reserve cotton circulation inventory and the next year’s reserve sales, With the participation of many factors such as expectations, foreign cotton and yarn, and macroeconomic policies, there are many uncertainties in future market trends. All parties involved can pay close attention to and rationally use financial instruments such as futures and options to avoid market risks and achieve smooth progress.

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