Since mid-July, Zheng cotton has risen again after a short period of correction. The main CF2309 contract hit a high of 17,300 yuan/ton in early trading on July 20. Most Xinjiang cotton processing companies, traders/futures companies have not adjusted their quotation bases. Poor, some cotton spinning enterprises’ desire to replenish their stocks at a low level has once again failed, and the market has a strong wait-and-see atmosphere.
A cotton company in Jinan, Shandong Province said that most cotton companies use the Zheng cotton CF2309 contract price of 17,000 yuan/ton as the “watershed”. When the price is lower than 17,000 yuan/ton, inquiries and orders show a continued recovery trend (transactions are at special prices) and low basis resources); when it is higher than 17,000 yuan/ton, transactions and shipments quickly weaken, and the phenomenon of price but no market appears.
It is understood that although the quoted weight quotations of Xinjiang machine-picked cotton for “Double 28” (or Single 29) in internal warehouses in Shandong, Jiangsu, Henan and other places on July 20 were generally raised to 18,000-18,200 yuan/ton (the CF2309 contract fluctuated upward in early trading), Actual transactions are relatively sparse, and some cotton companies can only adopt the “high quotation, big profit” model to stimulate shipments, but it is difficult to change the current situation of sluggish purchase of goods by textile companies as a whole. A textile company in Xuzhou, Jiangsu Province judged that compared with the strong rise of upstream cotton and other raw materials, small and medium-sized cotton textile companies are suffering from a large loss of cotton yarn, increased gauze inventory rate, tight cash flow, and rising expenses. Therefore, the situation is extremely unfavorable. Either the pressure of rising cotton yarn costs is transmitted and released to the downstream and terminals, and the industrial chain is gradually straightened out; or the price of cotton gauze “stands still”, the pressure is pushed back upstream, and cotton processing enterprises/traders give up profit margins, otherwise it will continue In the predicament of “a dilemma, being attacked from both sides”, more and larger textile companies will be forced to choose to reduce production or even suspend production in July and August to reduce losses.
Some cotton traders judge that the main cotton-producing areas in Xinjiang have recently continued to encounter widespread, intense, and long-lasting high temperature weather, which has triggered rising concerns about a decline in Xinjiang cotton yields in 2023/24 and domestic cotton supply before Xinjiang cotton is launched in 2023/24. Still tightening has become the key to Zheng Mian’s “can’t fall, but can rise”. In the second half of 2023, the central bank’s credit will be strengthened, substantial easing, and Russia’s withdrawal from the Black Sea Grain Transport Agreement will trigger a sharp rise in global grain prices, which will be beneficial to Zheng Mian. To form a boost, cotton textile companies need to seize the opportunity to enter the market, lock in advance the cotton resources that meet production requirements and meet the needs of orders, and reduce the order and delivery risks in 2023/24 to a low level.