Derivatives help the cotton industry develop steadily
“Seeing that the more than 4,000 acres of cotton fields planted by my family are becoming whiter and whiter day by day, although everyone in the family is still very tired, their happy mood cannot be concealed. The results of months of hard work are finally It will be the joy of a bumper harvest.” Sister Zhu, a large cotton grower in Hutubi County, told the Futures Daily reporter that she is now more worried about the delay in the ginner’s purchase of seed cotton. She is also worried that the price of seed cotton is too far from expected. So, what kind of development trend will my country’s new season cotton market show?
The new season cotton yield and total output are expected to be optimistic
Some cotton farmers in Xinhe County, Xinjiang, told reporters that although high temperatures occurred in many cotton areas in July, drip irrigation became a problem in a small number of cotton fields with tight water supply, damaging the growth and development of cotton. But overall, since the sowing of cotton this year, the weather in Xinjiang’s cotton areas has continued to improve, which is conducive to cotton growth, especially with sufficient accumulated temperature. The cotton yield and total output are expected to be higher than last year.
Li Jing, deputy director of the Department of Agriculture and Rural Affairs of the Xinjiang Uygur Autonomous Region, recently stated at a press conference on epidemic prevention and control held by the Information Office of the People’s Government of the Autonomous Region that Xinjiang is the country’s largest high-quality commercial cotton base, with total cotton production, unit yield, and commodity allocation. The quantity ranks first in the country for 28 consecutive years. Cotton is currently growing well in the region and is about to enter the cotton harvest season. The maintenance and debugging of more than 7,000 cotton picking machines has been completed, an increase of about 600 machines from the previous year. Cross-region operations are fully prepared and can fully meet the needs of mechanized harvesting. The machine picking rate It is expected to exceed 80%.
According to the reporter’s understanding, relevant institutions in Xinjiang have already made preparations in advance for issues such as whether epidemic prevention and control will affect the picking of new cotton and how to ensure the quality of picking, which everyone is particularly concerned about. Arrangements were made and various safeguard measures were detailed and implemented. The first is to strengthen quality control during the cotton harvest period, further standardize and strengthen the technical requirements for agricultural drones to spray cotton defoliants, and strictly implement key quality aspects such as spraying defoliants during cotton harvest, “three silk” management and mechanical standardized harvesting. Control measures. The second is to establish a coordination mechanism for joint military and field operations across regions, conduct timely consultations on machinery recovery situations, ensure the supply of spare parts and fuel, and clear up congestion points in agricultural machinery operations. In addition, priority will be given to ensuring oil for agricultural machinery.
The mentality of market players in the industry chain is becoming increasingly rational
“In recent years, whenever the picking time of new cotton is approaching, the ginners scattered all over Xinjiang are brightly lit day and night. Everyone is trying their best to ‘rush’ to harvest the new seed cotton, and many ginners are in 2019. , We have indeed tasted the sweetness in the ‘rush to harvest’ in 2020, and the operating profits are relatively generous.” Lao Chen, a cotton merchant in Wenzhou City, Zhejiang, told reporters that in 2021, when ginners raised prices and “rushed to harvest”, they obtained a large amount of newly produced seed cotton. Later, domestic spot cotton prices fell together. By mid-July this year, the mainstream price of lint in the market was about 10,000 yuan/ton lower than the average lint production cost of ginners. Most ginners suffered heavy losses, 10 The money earned each year is not worth the losses caused by one year’s business mistakes. This year, when new cotton is about to be launched, as an important market player in the cotton industry chain, ginners are facing the pressure of tight capital supply on the one hand, and the problem of poor sales of old cotton on the other hand; in addition, they also have to face Many matters such as increasing the deposit for new cotton season purchases, advancing loan repayment time, and operating risks must be strictly controlled. At this time, the “engine” that drove up cotton prices in previous years will stall. Most ginners have a moderate, rational, and capable purchase mentality, and the market will definitely not see the phenomenon of “rushing to harvest” again.
“Recently, the China Cotton Association has issued a proposal aimed at strengthening industry self-discipline and reminding everyone to participate in acquisitions rationally.” Lao Chen said that under the influence of multiple factors, the domestic cotton market pattern has undergone qualitative changes, and industrial enterprises We have encountered unprecedented difficulties in operations. Even after new cotton comes on the market, the majority of cotton farmers will be reluctant to sell because the mainstream purchase price is far from the expectations of cotton farmers. However, it is estimated that ginners will not increase their purchase prices. In the end, cotton farmers will still actively sell. . The main reason is that relevant agencies will continue to implement the target price policy for cotton farmers in Xinjiang this year. No matter how low the market purchase price drops, relevant agencies will According to the seed cotton purchase price corresponding to the lint price of 18,600 yuan/ton, the price difference will be compensated to farmers, which means that the final income of cotton farmers will be fully guaranteed.
Shandong cotton merchant Lao Zhou said that from the analysis of the internal and external environment and development trend of the domestic cotton market, destocking of the cotton market will be a relatively long process. It is still difficult to find bright spots in the current market demand, such as some pure products in Henan Cotton textileenterprises have all stopped production, and consumer demand in the entire downstream is constantly downgrading. At the same time, the supply of domestic old cotton plus new cotton in the new year will be as high as 10 million tons, which may cause a sudden and sharp decline in prices after the new cotton comes on the market.
“So far, relevant agencies in Xinjiang have announced the current operating status of ginning plants. After this year’s new cotton comes on the market, although the number of ginning plants has decreased compared with last year, the total production capacity is still relatively large.Some professionals predict that the phenomenon of ‘panic buying’ will continue to occur. “In this regard, Lao Zhou believes that the “remember to eat but not to fight” cotton ginning factory definitely exists, but it will not become the mainstream of the market. Faced with the current situation of “sparse” downstream orders, “rush buying” is just the dream of some people.
Industry professionals told reporters that judging from the current mentality of market entities such as cotton traders and textile companies, when industrial companies are generally not optimistic about the future market, and when cotton stocks are sufficient and downstream orders are scarce, everyone is hoarding cotton and purchasing supplements. The enthusiasm of the warehouse is low, and it has a more obvious attitude of ordering based on sales.
Flexibly use cotton futures option tools to reduce inventory risks
Based on forecast data released by relevant agencies and field surveys in Xinjiang, the reporter found that the country’s total cotton output is expected to reach 5.92 million tons this year, a year-on-year increase of 2.5%, and the demand is expected to be 7.6 million tons. If we consider that the current inventory of old cotton is as high as more than 3 million tons, plus the amount of newly imported cotton, then the domestic cotton market supply will be relatively abundant in the new year, and the market is expected to This year, the mainstream purchase price of new cotton will return to the level of 2019. In this market context, many market entities said that they will learn from last year’s failure to conduct hedging operations on the futures market in a timely manner, and will flexibly use cotton futures and options tools to combine futures and spot businesses based on careful analysis of market development trends. Business operations such as warehouse receipt mortgage financing, Chen cotton destocking, and price fluctuation risk avoidance for raw material and finished product inventory. Not only must we try our best to improve the external environment for corporate operations, but we must also maintain operational stability.
According to the reporter’s understanding, from a comprehensive perspective on the agricultural product market, cotton futures and options tools have been widely used by industrial enterprises. Over the years, they have played a major role in ensuring supply and price stability in the cotton market and ensuring the stable operation of industrial enterprises. This year, when the market influencing factors are more complex and changeable, it is even more important for industrial enterprises to use cotton futures option tools flexibly. At present, some cotton farmers, cooperatives and group enterprises with large cotton planting areas in Xinjiang have carried out pre-sale hedging operations in advance. With the recent simultaneous decline of domestic and foreign cotton prices, they have effectively avoided the risk of price downside.
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