With the release of reserve cotton and the implementation of the 700,000-ton sliding tax quota, all the negatives are immediately profitable. This atmosphere pushed the futures price of Zheng cotton to exceed the level of the end of February. With the previous high, market consensus expectations have begun to strengthen, and it has gradually become a market consensus that it is easy to rise but difficult to fall. But where will the price go after the rise? What is the market consensus and disagreement?
This round of rising prices for Zheng cotton has realized the benefits on the supply side. With the release of two planting area reports from China and the United States, the impact of this year’s excessive grain-to-cotton ratio on cotton planting intentions has come to an end. The reduction in planting area has become a consensus, and the market has turned to trading on yield factors. Although China and the United States The progress of planting and growth in the three countries of India and India is still slow, but weather factors are gradually improving. It is too early to draw a conclusion at present.
The price of seed cotton determines the cost position of lint cotton in the new year. If there is no negative news beyond expectations, It will also be the cost support range for lint prices throughout the year. With the expansion of Xinjiang’s ginning production capacity in recent years and the advancement of Xinjiang’s policy of returning farmland to forest, the tight supply and demand for seed cotton has become a reality. Whether the rush to harvest caused by last year’s autumn harvest can be repeated this year, the expectations of cotton farmers and ginners deserve attention. Due to the overall increase in cotton planting costs this year, including land rent, chemical fertilizers, water, electricity and labor, and the expected production reduction caused by early weather disasters, cotton farmers intend to rely on seed cotton prices to maintain their planting profits, and ginners are also willing to cooperate. Last year Since the autumn harvest, cotton prices have risen steadily, opening up profit margins for ginning plants. At the same time, the competitive landscape of ginning production capacity is also an indisputable fact. According to recent surveys, the consensus between cotton farmers and ginners is that the expected price of seed cotton is 7.5-8 yuan/kg, and the estimated lint processing cost is 16,500-17,800 yuan/ton. The current round of cotton rise has partially fulfilled this expectation.
In addition to the realization of supply-side benefits, the explosion of cotton consumption has also boosted this round. The key to market conditions. The intuitive manifestation is that the destocking of cotton commercial inventories has increased, and the inventory level in June has been lower than the same period in the past two years. At the same time, the selling and storage rotation since July has maintained a hot atmosphere, and the average transaction price has gradually increased.
The boom in cotton consumption, to a large extent Rely on cotton’s direct downstream spinning mills. The price increase of yarn is much higher than that of raw cotton, and spinning profits are further expanding. It can be seen from relevant tracking data that the operating load of yarn mills after the Spring Festival has basically exceeded the load level of the same period in the past five years. At the same time, the domestic yarn explicit inventory has not been significantly accumulated. The coexistence of high production and low inventory once caused cotton yarn futures to go out of the sharp rise. However, after the price of cotton yarn futures rose, there was still no warehouse receipt and effective forecast generated. The cotton yarn market is boosting the cotton market, and this fact is gradually becoming a bright sign in the long-short battle.
But the prosperity of the entire cotton spinning industry chain is certain High? The cotton spinning industry chain is long and complex. The only conclusion at present is that the direct consumption of cotton is booming, but the consumption of cotton yarn and downstream finished products has not seen any bright spots. Judging from the situation at the domestic gray fabric end, the production and sales situation is not as optimistic as that at the yarn end. The profit of gray fabrics has been greatly compressed, and the operating load is weaker than the same period in 2018. The inventory of gray fabrics has been significantly accumulated since March, which shows that gray fabrics are being digested downstream. Motivation has waned.
So, where did the cotton yarn go? According to research, since this year, supported by supply chain financial pallets, the stocking capacity of large and medium-sized yarn traders has increased significantly. In addition, cotton yarn prices have been rising in the early stage. As the epidemic situation in Southeast Asia worsens, Vietnam’s production starts decrease, and the price difference between domestic and foreign cotton yarns further weakens. The market has become increasingly bullish on cotton yarns, and traders have the ability and motivation to stock up on yarns. At this time, cotton yarn stocks were high in Guangdong, Nantong and other places. The cotton yarn was not consumed, but became hidden inventory and was hidden.
The high inventory of cotton yarn has become a “time bomb”, but can it explode? If it falls, you still need to see whether there is a possibility of “ignition” in the market. Whether the future terminal demand of the textile and apparel industry is optimistic or not is an important difference in the current market, which will determine whether high raw material costs can be successfully transmitted to downstream and even end consumers.
On the one hand, the global epidemic situation is still not optimistic, regardless of the high vaccination rate Both developed countries and developing countries with limited vaccination capacity have recently shown an increasing trend in new cases of COVID-19. However, it can be seen from the holding of major sports events such as the European Cup and the Olympic Games that overseas epidemic control measures are gradually being relaxed. Previously, China’s clothing exports had returned to above the five-year average, and the value of clothing exports in June even hit a year-on-year high. Although the global epidemic is still unknown,�If tough control measures are not taken, clothing consumption will maintain a recovery trend in the future.
On the other hand, European and American countries, as the main clothing In the retail market, consumption recovery coupled with inventory replenishment needs may become an important reason for further placing of clothing orders. Taking the United States as an example, after experiencing an overly pessimistic business atmosphere, U.S. wholesalers’ clothing inventories have experienced a significant year-on-year decline for 12 consecutive months. While significantly destocking, U.S. clothing imports showed counter-seasonal growth, but it was still not enough to push up clothing inventories. With the arrival of the peak U.S. clothing import season in August, September, and October, textile and clothing orders remained optimistic.
In summary, the differences in reality Although it continues, as long as textile orders continue to recover in the future, the oscillating and rising prices of the cotton market will still have the power to maintain. It is reported that a large cloth shop in Guangzhou Zhongda Market has issued a notice to increase fabric prices, and prices are expected to continue to be transmitted downstream.
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