Why Will Spot Cotton Prices Fall Sharply In The Domestic Market?

In the past two trading days, Zheng cotton appeared a continuous drop.

At the same time, the domestic spot cotton price and the average price of the reserve cotton rotation were also showing signs of weakening.

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With the normal operation of the pmission mechanism, the strengthening of the international cotton price and the shortage of domestic cotton production in the new crop year, why will the spot cotton price fall sharply in the domestic market?

According to the China Cotton Association survey, cotton planting area was 41 million 296 thousand mu this year, a decrease of 10.1% over the same period last year.

By the end of June, the cotton bud rate was 83.85%, which was 10.3 percentage points higher than that of the same period last year. The overall growth of cotton is worse than that of last year. The comprehensive climate suitability index of cotton growing areas in China is "more suitable".

The output of cotton depends on the weather conditions in 7 and August. If the weather conditions are better, the yield per unit area will be higher than expected.

"The cotton price suddenly declined rapidly, mainly due to the decision of the relevant agencies to extend the selling time of cotton reserves."

Zhou Wenke, research director of the earth futures research and development department, told futures Daily reporters that at the end of last week, the relevant agencies held a meeting on the issue of reserve cotton sale and decided to

The selling time is extended by 1 months, that is, until September 30th.

After the news spread in the market, cotton prices immediately responded, and Zheng cotton appeared a continuous drop.

According to the reporter, since April this year, the downstream of cotton

Strong growth stimulus, coupled with the sharp rise in cotton prices in major cotton producing countries such as India and the United States, and domestic cotton prices continued to rise. Among them, the 1701 contract price of zhengmian main force rose 6000 yuan / ton in 3 months.

During this period, although the reserve cotton sold about 30 thousand tons a day, it still could not meet the market demand. The market looked forward to increasing the selling amount of cotton reserves or extending the selling time, so as to prevent the market from worrying about the supply disruption and reduce the probability of a sharp rise in the price of the new cotton market.

Zhou Wenke believes that the extended sale period of reserve cotton can increase the market supply of about 600 thousand tons, which is undoubtedly a welcome news for the cotton textile enterprises wishing to increase the output of cotton reserves. It will not only ensure the raw material procurement of enterprises, but also avoid rising prices.

"However, judging from the recent double high prices of cotton and yarn prices for downstream cotton products, the impact of extended cotton sale time on cotton prices is only temporary. Cotton prices will return to the rising track when the current market supply is still tight."

In some exchanges with some cotton traders, the reporters found that there is a strong bullish mentality in cotton enterprises. The main reason is that the domestic cotton market is short of circulating resources, and the demand for cotton in downstream cotton enterprises is mainly dependent on the selling of cotton reserves. At the same time, the cost of importing cotton and imported cotton yarns is high and can not replace domestic cotton and cotton yarns in large quantities. In the case of the international cotton price remains strong, the domestic cotton production shortage in the new crop year is more severe or needs. The market expects that the cotton price will remain strong before the new cotton production is available in large quantities.