Industry dynamics

Pay attention to the suspension of the second batch of central reserve cotton to stabilize the marke

日期:2021-12-18 15:41:40


        On December 1, China Cotton Reserve Management Co., Ltd. announced that considering the current cotton market situation and with the consent of relevant departments, the supply of the second batch of central reserve cotton will be suspended from December 1, 2021. If there are great changes in the cotton market in the later stage, the central reserve cotton supply will be restarted in due time according to the market situation and regulatory needs. After the news was released, the main contract price of Zheng cotton futures rose by more than 2% to 20800 yuan / ton, and then maintained a partial oscillation. So, what impact will the suspension of reserve cotton have on the market? What is the trend of cotton price in the future?

Favorable new cotton sales

        "5 million tons of lint in Xinjiang has been saved, and there is hope for tens of millions of enterprises in Xinjiang's cotton industry chain." After the announcement of the suspension of the release of reserve cotton, the staff of a ginning plant sent a circle of friends. The suspension of reserve cotton supply means that the cotton supply in the market will be reduced in the short term, and new cotton will become the main supply resource, which is undoubtedly a support for Zheng cotton futures, which fell sharply for three consecutive days before the announcement.

"The release of reserve cotton aims to ensure the effective supply of domestic cotton spot market, stabilize the cotton market price and provide more optional cotton resources for downstream textile enterprises." Industry analysts mentioned that due to the sharp decline in the spot price of domestic cotton in the short term, the short-term market fluctuates violently. Timely suspension of the supply of reserve cotton is conducive to stabilizing the market panic and curbing the irrational fluctuation of market price.
It is understood that the release of reserve cotton this year is divided into two batches. The first batch is divided into two stages: the first stage is from July 5 to September 29, with a total volume of 630800 tons and a trading volume of 630800 tons, with a transaction proportion of 100%, which is very popular; In the second stage, from October 8 to November 9, the cumulative turnover was 395600 tons, with a turnover rate of 61.19%. Due to the poor quality of cotton, low market recognition and declining transaction rate, imported cotton was introduced into the second batch to meet the market demand for high-quality cotton. The planned volume of the second batch was 600000 tons. As of November 30, the actual volume was 265500 tons, the trading volume was 176800 tons, and the average transaction rate was 66.59%.
At the end of November, with the emergence of the new crown Omicron variation, the market panic intensified, causing the continuous decline of cotton prices. With the favorable suspension of the central reserve cotton supply, the Bulls took advantage of the strength to start the counterattack. What is the subsequent trend of cotton?

Restrain falling space 

       Industry analysts pointed out that the current supply and demand situation is too much, and the space for future cotton price decline is limited.From the cotton spot market price, the current domestic cotton spot purchase price has dropped compared with the previous period. As of November 30, the purchase price of machine picked cotton seed cotton in Xinjiang was 9.1 yuan / kg, and the cost support has weakened compared with the previous period, but it can not be ignored. At the same time, the domestic cotton spot basis is still at a high level, which will restrain the falling space of futures prices.
      From the perspective of supply and demand in the domestic cotton market, the domestic cotton output decreased significantly year-on-year in 2021 / 2022, the gap between domestic production and demand expanded, the dependence on imports increased, and the overall supply and demand situation was too much. At the same time, after two batches of central reserve cotton, the decline of national reserve inventory is expected to increase, and there is a potential possibility of replenishment. "It is estimated that the cotton futures price will be lower in the future market. If the bubble component is squeezed out, the price will return to the interval oscillation market, but the center of gravity of the oscillation will be lower than before." Analysts said.
      Some people in the industry also said: "The supply of reserve cotton has been suspended since December 1. We estimate that the reason is that the cotton price has fallen, the original intention to sell and store has been achieved, and the cotton volume in the reserve bank itself is small, so it is necessary to retain some of it. At present, the purchase price of hand picked cotton in southern Xinjiang has been continuously reduced, the average purchase price in a few areas has remained at about 10 yuan / kg, and most areas have been basically reduced to less than 10 yuan / kg, concentrated in 9 . 4 yuan / kg ~ 9.9 yuan / kg. The purchase price of machine picked cotton fluctuates greatly. After the sharp decline in cotton prices, downstream customers have certain price reduction expectations for cotton yarn prices, and most customers are wait-and-see. Traders in the market said that although the current quotation is relatively stable, most of the actual orders make profits. Short term cotton prices have not stopped falling, and empty orders continue to be held. "
      Industry insiders believe that although the suspension of reserve cotton is in line with market expectations, it has temporarily stabilized the market panic in the rapidly declining market. However, at present, the market has less favorable support, and the fundamentals of Zheng cotton have weakened. Recently, the price of cotton yarn has continued to decline, some textile enterprises have closed their plates without quotation, the delivery of goods has continued to slow down, and the downstream has continued to weaken. Under the background, the rebound height should not be too high.
       "The suspension of the supply of reserve cotton will provide some demand support for the cotton spot market in the short term.Under the current large current price difference, Zheng Mian has a high probability of rising in the short term, and the cotton market stops falling and stabilizes or rises slightly, which is a relatively positive signal for the current whole industrial chain market, especially for the replenishment process of enterprises before the Spring Festival. However, in the long run, under the influence of repeated epidemics and weakening demand expectations, Zheng Mian is expected to still operate weakly. In the later stage, we need to pay attention to the preparation progress of downstream enterprises before the Spring Festival. " Experts say.

(by our reporter Wei Shiwen)

Partial source: Zhang Jianchun, editor of futures daily

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