The annual Xinjiang seed cotton purchase has begun, and cotton rolling in the new year has begun. The haze of last year’s rush to harvest still hangs over the entire upstream cotton processing industry. However, judging from the initial performance of the scale, the price of seed cotton at the scale is indeed rising. Will ginning companies still rush to harvest this year? How will the game between cotton procurement and sales take place?
The new cotton harvest is mainly hand-picked cotton, which will not affect the overall purchasing market. At present, hand-picked cotton is mainly sold in the market, mainly processing wadding cotton, so the purchase price will be higher than machine-picked cotton. According to Xinjiang’s first-line survey, the current purchase price at the scale has risen from 6.5 yuan/kg to more than 7.5 yuan/kg. The short-term price increase is relatively large, and the reason for the increase is still related to supply and demand. A cotton trader told the author that there are currently many orders for cotton wadding in the mainland and the processing profits are high, prompting companies to rush to acquire and process it.
In addition, the increase in sales price in the early stage of the market is also related to the decrease in the market volume of hand-picked cotton. According to data from the National Cotton Market Monitoring System, as of September 8, a total of 43,000 tons of seed cotton and lint cotton have been picked across the country, an increase of 29,000 tons year-on-year, and a decrease of 20,000 tons compared with the average of the past four years; a total of 1,000 tons of seed cotton and lint cotton have been sold. A year-on-year increase of 1,000 tons, a decrease of 5,000 tons compared with the average of the past four years. It can be seen from the data that the picking volume has increased compared with last year. The reason is that the cotton matures this year earlier than last year. However, the picking volume is lower than the four-year average, indicating that the number of hand-picked cotton is decreasing, mainly due to the increase in machine picking rate.
Therefore, the above-mentioned increase in the open scale price of seed cotton does not represent the overall procurement market situation in Xinjiang. After all, the proportion of cotton cotton is very small. Of course, in order to prevent the recurrence of last year’s rush to harvest, relevant departments have recently issued early warnings: “A large amount of old cotton has not been sold out, global production is growing, consumption is declining, the market supply of cotton is relatively abundant, and frequent international and domestic emergencies have led to uncertainty With further increases, the pressure on the cotton market in the new year will still be high.”
The supply in the cotton market is loose and there is no basis for speculation. According to the data predicted by the National Cotton Market Monitoring System in August, domestic cotton production is expected to be 6.031 million tons in 2022, while the domestic cotton production predicted by the National Cotton Market Monitoring System in December 2021 is 5.801 million tons. This year’s production has increased slightly. 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. In 2022, domestic cotton consumption was 7.69 million tons, a decrease of 110,000 tons from the previous month, and an increase of 390,000 tons year-on-year; import volume was 1.9 million tons, a decrease of 70,000 tons from the previous month, and an increase of 280,000 tons year-on-year, an increase of 16.47%. It can be seen that domestic cotton supply and demand are loose and there is no basis for speculation.
Global cotton production, sales and inventory forecast data released by the US Department of Agriculture in September show that global cotton production in 2022 will be 25.79 million tons, an increase of 1.2% month-on-month and a year-on-year increase of 2.4%; consumption will be 25.83 million tons, a month-on-month decrease of 0.4% and a year-on-year decrease. 0.7%; the inventory-to-consumption ratio at the end of the period was adjusted from 69.50% in the previous period to 71.45%, an increase of 1.9 percentage points, and a year-on-year increase of 0.5 percentage points. The international cotton supply and demand situation is also looser than last year.
A large amount of new cotton is on the market, will companies rush to harvest it? The author believes that the probability of grabbing profits this year is low. First of all, the company has not made up for its losses this year. How can it have the strength and courage to gamble on the market? Many companies are now in debt. Although banks have implemented a policy of deferring loan repayments, debts must be repaid after all. The operating pressure of companies has only been postponed, not reduced. With such a huge loss last year, companies’ risk awareness will definitely increase a lot this year. Like the purchase of hand-picked cotton in September, companies set purchase prices with reference to their own sales prices, and contracts with downstream manufacturers have been signed for this sales price, thus well controlling risks. Once there is no profit or the risk increases, the company will not blindly raise the acquisition price.
When the author was conducting research in Xinjiang in August, ginning companies had already stated that raising prices to grab harvests in 2021 would leave a great hidden danger to the market outlook. In the later period, they could only watch the price of lint purchased and processed at high prices fall as the market continued to decline. In the end, they either continue to hold cotton and wait for a rebound, or they directly sell it at low prices to reduce losses. Because many companies choose the first method, the losses further expand. Therefore, acquisitions this year will be extremely cautious. If there is no suitable hedging space or the acquisition cost is too high compared to the market price, the company will reduce or stop the collection. After all, the painful price paid for the acquisition last year is still vivid in my mind.
The competition between cotton farmers and ginning companies is fierce. Will it be difficult to sell cotton? The game between cotton farmers and cotton companies should be more intense this year. According to the survey, the difference between the expected sales price of cotton farmers and the expected purchase price of cotton companies is more than 1.0 yuan/kg. The cotton market has been weak recently. Some companies in Northern Xinjiang have announced that the opening price is expected to be 5.0 yuan/kg. Whether this is a publicity strategy before the acquisition or a study and judgment of the market outlook, it shows that it is at least rational, but the result is only The price gap that can be caused between buyers and sellers should be difficult to make up in the early stages of seed cotton sales, and the tug-of-war between the two parties will continue for a period of time, which means that the purchase of large quantities of seed cotton this year is likely to be delayed. Taking into account the storage problem of large quantities of cotton on the market and the target price subsidies of Xinjiang cotton, in the end, after the stalemate, cotton farmers will choose to sell according to the market price, and there is a possibility of insisting on refusing to sell.The sexiness is very low.
Judging from the number of processing companies that have declared, the first batch of Xinjiang Autonomous Region cotton target price reform processing companies in 2022 will enter the public announcement stage, including 352 local companies and 258 XPCC companies, which is only 8 less than in 2021. ; In 2022, the second batch of Xinjiang Autonomous Region cotton target price reform processing enterprises has entered the public announcement stage, reaching 137 (excluding the Corps), 45 fewer than in 2021, and a total of 53 fewer in the first two batches. The total number of public announcements in the first two batches has reached 747 (including some Xinjiang Corps enterprises), which has accounted for the vast majority of processing enterprises in Xinjiang. The number of the third and fourth batches will be relatively small, and even if the number decreases, it will be limited. Therefore, In 2022, the number of ginning companies in Xinjiang can generally remain stable. If calculated based on the average processing capacity of each company of 10,000 tons, the total processing capacity of the first two batches of 747 companies that have been announced has reached 7.47 million tons, which is much higher than Xinjiang cotton production. It is fully capable based on the company’s processing capacity. Digest new cotton.
From the perspective of acquisition fund arrangements, this year the Xinjiang Uygur Autonomous Region Branch of the Agricultural Development Bank of China has made every effort to do a good job in credit work for cotton acquisitions in the new year, and has prepared 50 billion yuan of cotton acquisition funds in advance to ensure the safety, smoothness and stability of new cotton acquisitions. As of early September, the credit rating and credit approval work for 139 companies that plan to support cotton acquisitions has been completed, ensuring that every major cotton-producing county (city) has an Agricultural Development Bank loan-supporting enterprise to ensure that no “blank spots” are left in the acquisition. Promote Xinjiang cotton to be harvested by those who have money to harvest it, and effectively eliminate problems such as “white slips”, “purchasing at lower grades and lower prices”, and “difficulty selling cotton”, and effectively ensure the smooth and orderly operation of new cotton procurement. Assuming that the purchase cost of cotton per ton this year is 14,500-15,000 yuan/ton, the Agricultural Development Bank of China’s total capital of 50 billion yuan can purchase more than 3 million tons of lint cotton, accounting for about 60% of Xinjiang’s total cotton production. If the purchase price is reduced, the purchase quantity It will further increase, and with the self-raised funds by local commercial banks and enterprises, there should be no problem in financing the purchase of cotton this year. To sum up, the problem of difficulty in selling cotton for cotton farmers is relatively small.
What is the trend of seed cotton prices this year? The author believes that in the short term, cotton will still maintain wide fluctuations within the range. Now that we are in the peak demand season, it is unrealistic to expect cotton prices to continue to fall sharply, because the contradictions in the upstream purchasing market have not yet emerged, and the price difference between domestic and foreign cotton is very large. In the long term, we need to pay attention to the impact of the Federal Reserve’s interest rate hike policy, which is the most important financial event in the world this year. If the Federal Reserve can really achieve a “soft landing” for the economy while lowering inflation, then the current cotton price may be at the bottom of this year’s periodic range. On the contrary, the U.S.’s excessive interest rate hikes have led to an economic recession. The global economy will have a great negative impact, and domestic cotton prices may continue to bottom out.