Domestic cotton prices have a short-term “top and bottom”

On November 3-4, in Zhengzhou, commodity cotton electronic matching and other weather vanes continued to rebound strongly, with the high point approaching 15,450 yuan/ton (the high point at the end of October), and after breaking through, it went straight to 15,750 yuan. / ton, the spot quotations of some foreign businessmen and traders purchasing in Xinjiang have also slightly increased by 100-200 yuan/ton. In addition, driven by the rebound of futures, the pick-up and acquisition of flowers in southern Xinjiang entering the mid-to-late “sprint” stage, and the gradual improvement of the tight acquisition funds of some ginners, the purchase price of seed cotton began to rise tentatively after a short period of stabilization. On the 4th, the purchase price of seed cotton with a moisture content of 40% and less than 13% in some cotton areas in Aksu, Kashgar and other places rose back to 7.30-7.45 yuan/kg. In the early stage, it was 7.0-7.10 yuan/kg in Jiashi, Maigaiti, Yuepuhu and other places. The purchase price per kilogram has disappeared, and 7.25-7.30 yuan/kg is very common.

At present, neither Zhengzhou nor Xinjiang cotton spot can get rid of the pattern of “top and bottom”. Even if the CF1701 contract tests 15750, it is difficult to stand firm. The short-term 15000-15450 is a narrow box. It is more difficult to break through the body. The reasons are summarized as follows:

First, the main contract price above 15,300 yuan/ton will inevitably attract a large number of “hedging” orders. According to the survey, with the purchase price of seed cotton in Xinjiang falling sharply by 0.60-0.70 yuan/kg in mid-to-late October, the cotton seed sales price rebounded from a low of about 2.40 yuan/kg to 2.55-2.60 yuan/kg. Most factories are open to purchasing, and the comprehensive cost of lint cotton has generally dropped to 15,800-16,000 yuan/ton (some manufacturers are around 15,500 yuan/ton). The futures price of 15,300 yuan/ton corresponds to a gross delivery price of about 15,600-15,700 yuan/ton from the supervision warehouse in Xinjiang. If the premiums for grade, length, rolling quality, etc. are added, the ginning factory can completely “untie” or even slightly increase the price. Therefore, for the purpose of avoiding risks and completing sales in advance, once CF1701 exceeds 15,300 yuan/ton, it will definitely trigger a large number of real offers to enter the market. In addition, at present, cotton merchants mainly purchase futures warehouse receipts and hedge delivery, and there is not much room for futures to rise;

Second, the cost of lint and the imminent replenishment of fabric mills support the futures from falling deeply. Taking “grade 3128” hand-picked cotton as an example, the current transaction price in the southern Xinjiang supervision warehouse is 15,400-15,600 yuan/ton (gross weight), and some mainland fabric factories accept a factory price of about 15,800 yuan/ton. The ginning factory’s internal inventory cost in Xinjiang is around 15,800 yuan/ton, and the psychological expectations and acceptance capabilities of buyers and sellers are gradually getting closer (the gap between the two exceeded 1,000 yuan/ton in early and mid-October). In addition, judging from the raw material inventory situation of textile enterprises, there will be a round of cotton procurement around mid-November. The obvious delay in the purchase and finishing period of seed cotton in the Yellow River Basin and Yangtze River Basin has led to the “inadequate” lint cotton and the 2016/17 US cotton early season. Under the premise that it will arrive in Hong Kong for delivery in late December, Xinjiang cotton has become the only choice for textile companies.

Third, the decline in outer yarn prices and the lack of improvement in orders from fabric companies are obstacles to the rebound of cotton prices. It is reported that in the past month or so, due to the sharp decline in domestic cotton prices in India and Pakistan, the increase in yarn mill inventories, and the depreciation of the RMB, the FOB and CNF quotations of Indian and Pakistani yarns have fallen overall by 0.15-0.18 US dollars/kg, and the customs clearance RMB quotations have also dropped by 800-800. 1,000 yuan/ton. In early November, the price difference between domestic C21S and C32S yarn and imported Indian yarn reached 500-700 yuan/ton. Domestic yarn faces dual pressures on price and sales. With the end of the “Golden Nine and Silver Ten” peak seasons for weaving, fabrics, workwear and foreign trade companies, export and domestic sales orders have shown the characteristics of “even lighter in the off-season”. Downstream companies are more concerned about large orders, orders with long delivery times, and unprofitable orders. Prudence, and the tightening of working capital has forced fabric factories and workwear factories to “buy as they go, leaving no inventory” when purchasing raw materials.

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