We often say that the cotton market often has three most critical “time windows” in a year, during which prices often undergo important changes; and interestingly, they coincide with China’s three important holidays.
The first is the “May Day” window period, which coincides with the cotton planting season, and the sowing area has basically been settled; the second is the “National Day” window period, the harvest period when cotton is put on the market in batches, and the one-year supply, seed cotton purchase price, etc. are basically confirmed ; The third is the “Spring Festival” window period. Important economic and industry statistics for the year are intensively released before and after, making it possible to judge consumption for the year.
At present, we are gradually entering the crucial period of new cotton being launched.
In late September, Xinjiang cotton gradually began to be picked in large quantities. As the purchase price of seed cotton in various places gradually emerges, although it is relatively chaotic and has not yet formed a more unanimously recognized purchase price, every move in the market affects the “nerves” of the spot and futures markets.
As a market barometer, the purchase price of Xinjiang seed cotton is basically one price per day, which is higher than the same period last year.
Xinjiang’s cotton output this year is significantly higher than last year, but in the face of the huge production capacity of cotton gins, panic buying and speculation have become inevitable, making the market particularly worried about whether there will be an unfavorable situation of rising high and falling low.
The countdown to the release of the State Reserve Reserve has entered, and the transaction rate remains high. The average transaction price last week was 14,846 yuan/ton, an increase of 196 yuan/ton from the previous week. As of last Friday, a total of 3.07 million tons of cotton reserves have been sold out of the warehouse this year, with a transaction rate of 72.73%. There is only one week left for the stockpiling, and the cumulative trading volume is expected to reach about 3.2 million tons. After two consecutive years of efficient stockpiling, we believe that the total national reserve cotton inventory will drop to 5.3 million tons by the end of September.
After experiencing a sharp decline in the negative USDA report last week, the Zheng cotton market returned to a volatile pattern this week. The price of the main contract 1801 fluctuates around 15,500 yuan/ton. With a large number of new flowers on the market and a large number of cotton reserves being rotated out, the market is worried about sufficient short-term cotton supply, and the bearish sentiment is still heavy.
The domestic cotton spot market was stable and slightly increased. Among them, the average price of CNCotton B for one week was 15,893 yuan/ton, an increase of 18 yuan/ton from the previous week; the average price of CC Index 3128B was 15,973 yuan/ton, an increase of 15 yuan/ton.
In the external market, since late August, ICE cotton futures have basically followed the hurricane. After Harvey and Irma swept through, Hurricane Maria has become a key factor affecting the market in the past two weeks. This week, as concerns about the potential damage caused by Maria to cotton subsided, ICE’s main cotton futures contract fell as much as 1.52% on Thursday. Asian electronic trading temporarily stabilized after hitting a bottom of 68.11 cents/pound on Friday, but has returned. to the location before Hurricane Harvey. The decline in ICE cotton futures has an immediate impact on the Cotlook A index. This week, the average price of Cotlook A is 79.36 cents/pound, equivalent to RMB 13,071/ton, down 259 yuan from last week. The external market has once again become the key to “influencing” changes in the reserve price. factor.
To sum up, this week will be a critical week in determining the direction of the cotton market. On the one hand, the rotation of cotton reserves will usher in the last week of this year, and the seven-month reserve bonus period will gradually fade out; on the other hand, new cotton purchases will be opened on a large scale, and public inspections of new cotton will also be launched one after another. The “opening price” of new cotton will be unveiled. According to predictions, the bottom price of reserve cotton this week will be at 14,502 yuan/ton, a decrease of 121 yuan/ton from the previous week, but this is unlikely to have a big impact on the reserve selling transaction.
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