The cotton market in the Year of the Monkey is really unstable. At the beginning of the year, affected by the strong destocking expectations of cotton reserves and the rotation pricing mechanism to integrate domestic and foreign cotton, domestic cotton prices fell to a low point (spot prices fell below 12,000 yuan/ton, and futures contracts exceeded 10,000 yuan). In early April, after the Jiaxing meeting, the market situation reversed, and cotton futures prices soared. The futures prices rose by more than 3,000 yuan/ton in two weeks, and had reached the daily limit several times. In late June, due to lower than expected cotton reserve volume and concerns about cotton supply after the end of the rotation at the end of August, cotton futures rose again, exceeding 15,000 yuan/ton in one fell swoop.
It stands to reason that the price of cotton has risen so crazily. For cotton spinning companies, this can be used as an opportunity to increase prices. However, due to poor price transmission, the price increase of cotton is greater than that of cotton yarn, and the price increase of cotton yarn is greater than that of gray fabric. Textile companies have to absorb part of the costs themselves, which is quite a bit like knocking off teeth and swallowing it in the stomach.
Data shows that because this year’s reserve cotton rotation has not restricted traders’ auctions and storage, the amount of reserve cotton currently participated by traders in the auction accounts for about 40% of the total transaction volume. With the price increase and the uncertainty of the later rotation policy, Traders are gradually optimistic about the future market, and most of the reserve cotton auctioned are stored for sale. This part of the reserve cotton has formed commercial inventory and has not flowed to the market. There are very few actual transactions, which to a certain extent has intensified the contradiction between supply and demand of cotton.
At the same time, affected by the decline in planting efficiency, the planting area in mainland China continued to decrease in 2016. According to the “China Cotton Actual Sowing Area Survey Report” in June, the country’s actual cotton sowing area in 2016 was 43.851 million acres, a year-on-year decrease of 7.337 million acres, a decrease of 14.3 million acres. %, of which the Yellow River Basin dropped by 24.7% year-on-year, the Yangtze River Basin dropped by 27.7% year-on-year, and the northwest inland dropped by 7% year-on-year. The sown area in the Yellow River and Yangtze River Basin, the main cotton-producing areas in the Mainland, once again decreased significantly. In addition, early heavy rains also had an adverse impact on cotton yields. Surveys show that as of the end of June, cotton growth in the Yellow River Basin and the inland northwest cotton areas was basically normal. Waterlogging occurred in the Yangtze River Basin, which affected cotton growth. The number of cotton buds increased year-on-year. Reduction, picking time is expected to be delayed. If the weather is normal in the later period, the total new cotton output in 2016 is expected to be 4.839 million tons, a decrease of 7.2%. The further reduction in cotton output will provide positive support for market cotton prices.
Seeing that domestic cotton prices are soaring, will textile companies turn their attention to imported cotton? Even though imported cotton has quota restrictions and the quantity is small, the quality is good.
First of all, as mentioned above, imported cotton is subject to quota restrictions and the volume itself is not large: my country’s cotton consumption in 2015/2016 was about 7 million tons, of which imported cotton was about 1 million tons. This year’s imported cotton imports have dropped significantly compared with previous years: According to statistics from the General Administration of Customs, in June 2016, my country imported 72,500 tons of cotton, a month-on-month decrease of 5,800 tons, or 7.36%; a year-on-year decrease of 88,800 tons, A decrease of 55.06%; from January to June 2016, my country imported a total of 430,200 tons of cotton, a year-on-year decrease of 502,800 tons, a decrease of 53.89%. Therefore, if we really want to rely on imported cotton to provide emergency relief, it will be a drop in the bucket.
Secondly, most of the annual import quota falls into the hands of traders. As the price of domestic cotton rises, traders with imported cotton will naturally not miss this great opportunity to make money. The results can be imagined. Know.
For cotton-related textile companies, this time it is really a time of internal and external troubles. Some textile companies even simply stopped production and took holidays. But now there is finally good news: Recently, cotton exports from Xinjiang have gradually increased, which will help stabilize cotton futures prices. If everyone keeps persevering, the difficult days may be over soon.
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