Since the launch of new cotton in 2022, the cost of purchasing and processing new cotton has received great attention. According to the current open scale price, the cost of new cotton will be less than 12,500 yuan/ton, which is not only significantly lower than the futures price, but also lower than the current sales of Chen cotton. Price (the current transaction price of Chen cotton is 15,000-16,000 yuan/ton).
Affected by various factors this year, the entire new flower picking, delivery and processing time in Xinjiang will be delayed. A large amount of new cotton is expected to be picked after the National Day, which means there is a time window left for old cotton to be sold at the current price. Slightly expanded, but still very limited in time. Once new flowers come on the market, the price of new cotton will be used as the market pricing benchmark, and the high cost of old cotton will lose its support and significance. The impact of the integration of old and new cotton prices has a great impact on the market.
According to Wind data, as of the end of July 2022, the national cotton commercial inventory was 3.194 million tons, a year-on-year increase of 691,000 tons; Xinjiang cotton commercial stocks were 2.4601 million tons, a year-on-year increase of 1.288 million tons. Nowadays, the cost of new and old cotton is very clear, and the upstream and downstream industrial chains are very clear. For textile companies, the raw material inventory cost is more than 15,000 yuan/ton, while the cost of new cotton is less than 12,500 yuan/ton. Faced with such a large price difference , textile companies are actually full of worries. The current procurement strategy is to replenish the inventory, which will continue until new cotton is launched. In order to avoid high-priced inventories, downstream cotton spinning companies have also reduced their purchases of raw materials, and some companies even plan to extend the National Day holiday.
Such a large price difference occurs at the turn of the year between new and old cotton. Such a situation has been very rare in the past, especially in the bear market stage. It has a greater impact on the market, especially the pressure on unsold old cotton. For Chen Mian, the best way to avoid risk expansion is to sell as soon as possible. The author believes that in the “bears are long and bulls are short” stage, selling according to market conditions is the best insurance. The probability that ginning companies will continue to raise prices to grab the harvest and push up the price of seed cotton is very low. After all, the scars from yesterday have not yet healed, and the personnel and funds are not in place. In addition, it has become a consensus that the cotton market is expected to weaken in the future. How can companies dare to rush to harvest.
Although companies now have good hedging profits for acquisition and processing, this is based on the price support of old cotton. Once new cotton comes on the market in large quantities, the price of new cotton will dominate the market, and it is highly likely that cash will return during that period. Therefore, risk control is still the primary consideration for businesses currently operating. After all, against the background of the Federal Reserve’s continued interest rate hikes, the overall commodity market will be under great pressure.