Market Analysis: The Short-Term Downward Space May Be Relatively Limited In The Cotton Harvest Season

As the time came to the middle of October, a large number of Xinjiang cotton began to be picked this year. At the most important time when the National Day was opened in Xinjiang cotton in previous years, the purchase price of new flowers often fluctuated greatly during the National Day, but the price of new flowers this year was relatively stable, and there was no such situation as sharp rise and fall or three prices a day. The purchase price of Xinjiang cotton in the New Year basically showed a trend of high opening and gradually rising during the National Day, and then slightly decreasing. However, the overall fluctuation range was relatively limited. It can be said that the purchase mentality of ginning plants this year was relatively stable, and the purchase price was basically within the expected range, and there was no unexpected rush for revenue and price, This also led to cotton (14690, -40.00, -0.27%) futures did not rise significantly after the opening, even when the purchase price fell after the National Day, futures prices also fell. So how about the purchase price of Xinjiang cotton this year, the quality of new flowers, the total output of new cotton and the impact of new flowers purchase on the panel price, and how about the price trend after large quantities of new flowers come into the market in the later period? Today, we would like to share our views with you.

Before the purchase of Xinhua in the new year, many research institutions went to Xinjiang for field research in August and September. According to the survey results, the market believed that the cotton yield in Xinjiang was good this year, especially the seed cotton yield in northern Xinjiang. So many local enterprises and research institutions in Xinjiang predicted that the cotton yield in Xinjiang might be more than 6 million tons this year. At that time, most people believed that the planting area of Xinjiang cotton in this year was slightly lower than that of last year or almost the same as that of last year.

However, with the recent harvesting of Xinjiang cotton, the market has made some amendments to its market. According to the regions that have been picked at present, the real yield per unit area this year is definitely higher than that of last year, but may not be as high as the market expectation in August and September. According to the report of China's cotton information, they predicted that the average cotton yield in Xinjiang would be about 420 kg/mu, which was slightly lower than the previous Xinjiang cotton yield per mu.

However, China Cotton Information Network has significantly increased the planting area of Xinjiang cotton this time. According to their research in southern Xinjiang, the cotton planting area in Kashgar, Akesu, Kezhou and Hotan has significantly increased compared with last year, with a large year-on-year increase. Information Network has increased the planting area of Xinjiang cotton flowers by 2.22 million mu to 39.1 million mu in 2024, with a year-on-year increase of 6.7%, As a result, the final output of Xinjiang cotton was adjusted to 6.061 million tons, up 8.3% year on year.

Based on the above information, although the per unit yield of Xinjiang cotton this year may not be as high as the previous market expectation, it will still increase year on year. If the area remains unchanged, we think the probability of Xinjiang cotton output this year will be around 5.9 million to 6 million tons. However, the report of China Cotton Information Network in October significantly increased the planting area of Xinjiang cotton. If this is true, the final output of Xinjiang cotton of 6 million tons must be low.

According to the survey data of 900 farmers in 45 counties of 13 provinces by the National Cotton Monitoring System, as of October 10, the cumulative cotton picking progress of the country this year was 29.9%. Based on the domestic cotton output of 6.384 million tons this year, the cumulative picking volume converted to lint cotton volume as of October 10 was 1.911 million tons; As of October 10, the national seed cotton sales progress was 60.7% (sales progress=cumulative seed cotton delivered/cumulative seed cotton picked by cotton farmers), then the sales volume of lint was 1.159 million tons. Both the picking progress and the sales progress this year are much higher than that of the same period last year, which also reflects that cotton farmers have relatively high recognition of the current price this year, and their willingness to sell is significantly higher than that of last year.

According to the data of China Cotton Information Network, as of October 13, the cumulative processing volume of Xinjiang cotton was 497500 tons, an increase of 229600 tons over last year, and the cumulative processing volume increased by 116.7% year on year; On October 13, the lint processing volume was 64900 tons, compared with 32100 tons in the same period last year. It can be seen from the data that the processing progress and processing volume of Xinjiang cotton this year are significantly higher than last year.

This year, the purchase price is relatively stable. Before the purchase of Xinhua, most of the market expected the purchase price of Xinjiang machine-made seed cotton to be 5.5-6 yuan/kg, and there is a more optimistic expectation that the purchase price would be 6-6.5 yuan/kg. This year, because the Federal Reserve cut interest rates by 50 basis points more than expected in September, the Chinese market also announced that there would be more relaxed monetary policy, and the macro expectation of the market was good. The price of bulk commodities rose to a certain extent. Affected by this, the price of Zheng Mian also began to rise.

The higher price of Zheng Mian also drove the purchase price of seed cotton. At the beginning, the purchase price of machine picked seed cotton was 6.1-6.2 yuan/kg, and then the highest price rose to 6.4-6.5 yuan/kg. After the National Day holiday, the price of machine picked cotton fell again, and the current price is 6.2-6.3 yuan/kg. According to the cottonseed price of 2.2 yuan/kg, the net clothing percentage of 38%, and the processing fee of 1000 yuan/ton, the price of 6.2-6.3 yuan/kg is converted to the lint price announcement cost of 14400-14700 yuan/ton.

According to the previous situation, the lint quality is slightly higher, and there will be a premium of several hundred pieces. In this case, the current price around 14200 yuan/ton of Zheng Mian's main contract is relatively appropriate, and even some well done ginning plants still have profits when selling condoms on the plate.

To sum up, due to the low enthusiasm of ginning plants to rush to harvest this year, but the willingness of cotton farmers to sell is relatively high, the progress of cotton picking and processing is much faster than that of last year. The price also remained relatively low due to the moderate enthusiasm of cotton farmers for sales. Even though it rose during the National Day, it was still in the relative middle of the expected price. In addition, as Xinmian acquires panels in succession, the pressure of selling hedging will also increase. The current cost of seed cotton acquisition is not much different from the price of panels. If there is a better ginning plant that sells hedging on the panel, it will still make profits. Therefore, some ginning plants also begin to sell hedging on the panel in succession.

However, from the perspective of the current sale progress, the current hedging offer in the market should not be too large, and there is still a large amount of pressure on hedging in the later period. The fundamentals of cotton are also relatively weak. The output supply increases while consumption is poor, so the market is relatively empty from the perspective of industry. However, at the macro level, whether monetary easing policy or the crude oil price trend brought about by the future Middle East war, the bulk commodities may rise. Therefore, it is predicted that the downward space of cotton may be relatively limited in the short term due to industrial factors, and the price of Zheng cotton may be relatively strong in the future if the macro view becomes the focus again.