Market Observation: Understanding Of The Factors Causing The Continuous Decline Of Cotton Futures

Since the first ten days of January, cotton futures have continued to decline. The reporter found that with the listing of new cotton in the past two years, cotton prices have declined to varying degrees. What is the reason for the decline of cotton this year?

At present, the supply and demand of lint end has gradually turned loose. Under the policy regulation, the supply of lint in the mainland market increased, the continuous supply of reserve cotton and the issuance of sliding tax quota brought about the increase of imported cotton, while the negative feedback at the cotton yarn end continued to transmit. Under the pressure of high inventory of cotton yarn, the cotton yarn price continued to weaken, leading to continued losses in spinning, thereby reducing the operating load of the yarn mill and reducing the direct consumption demand of cotton. The supply and demand presented a double weak situation.

In addition, at the beginning of the new year, the listed quantity of reserve cotton per trading day rose from 12000 tons to 20000 tons, and the quota of 750000 tons of sliding allowance tax was issued to enterprises and the expectation of continued dumping and storage in October turned the supply of cotton in the market from tight to loose.

At the initial stage of the listing of new cotton, ginners were cautious in purchasing, cotton farmers set prices, and Zheng Mian's high position fluctuated slightly under the stalemate between the two sides. With the outflow of rumors of "loan restriction" and the high moisture content of egg cotton, the purchase price of seed cotton loosened and fell, and Zheng Mian fell sharply. Although the market expected the output reduction of Xinjiang cotton to be larger than expected, the transaction logic has shifted from the supply side to the demand side. In October, Zheng Mian's main contract fell by more than 2000 yuan/ton.

This year, the seed cotton sales market showed a trend of high opening and low going. Compared with the price of 5.2-6.2 yuan/kg last year, the opening price in most areas of Xinjiang this year is 7.7-8.1 yuan/kg, but the actual transaction is relatively limited. The main reason for the limited turnover is the game between cotton farmers and ginning mills. At the same time, ginning mills are also constantly reducing the purchase price of seed cotton to reduce the lint cost hub in the new year. At the same time, as the purchase price of seed cotton declines, the potential hedging pressure moves down, further stimulating the panel and seed cotton market to form a negative feedback between each other.