Affected By The Expectation Of The Federal Reserve To Raise Interest Rates, Cotton Prices First Fell Under Pressure

 

In 2022/23, with the continuous optimization of epidemic prevention and control policies, the domestic economy is running steadily and well, the textile and clothing consumer market is gradually recovering, cotton demand is recovering, and the domestic cotton price has rebounded to a new high since the year. At the beginning of the year, the market was depressed and the price fell. The China Cotton Price Index (CCIndex3128B) reached the annual minimum of 14887 yuan/ton on December 17, 2022; Since then, with the gradual recovery of textile and clothing consumption from the low level, the demand for cotton has increased, and the domestic cotton price has risen; Since the cotton planting in 2023/24, the expectation of yield reduction due to adverse weather has increased. Under the expectation of yield reduction and tight supply, the domestic cotton price has shown an obvious upward trend, hitting new annual highs repeatedly. On August 31, the China Cotton Price Index (CCIndex3128B) closed at 18294 yuan/ton, the highest point of the year, up 2310 yuan year-on-year.

At the beginning of August, the domestic cotton price dropped significantly due to the off-season of the downstream market, and the spot price continued to rise in late August under the support of favorable policies such as halving stamp duty. China's cotton price index rose to a maximum of 18294 yuan/ton, a new high of this year. During the month, textile mills actively bid for the central reserve cotton, all of which were 100% successful, easing the supply pressure on the spot market.

Internationally, affected by the expectation of the Federal Reserve to raise interest rates, cotton prices first fell under pressure, and then increased due to the increased expectation of output reduction in extreme weather such as drought and hurricanes in the United States. The difference between domestic and foreign cotton prices expanded to about 1500 yuan/ton in the early months of the month, and narrowed to about 1100 yuan/ton in the later years because the international cotton price increased more than the domestic cotton price.

　 1、 Changes in spot prices at home and abroad

（1） The spot price of domestic cotton rose sharply, hitting a new high this year

In August, due to the obvious off-season characteristics of the downstream market in the early stage, cotton prices were dragged down by shocks. In the late market peak season, there were signs of starting. Many favorable policies were introduced, such as the halving of the domestic stamp tax, which boosted market sentiment and supported cotton prices to rise significantly. At the end of the month, China's cotton price index hit a new high this year. On the 31st, China's cotton price index (CCIndex3128B) was 18294 yuan/ton, up 296 yuan month on month; The average monthly price is 18109 yuan/ton, up 352 yuan month on month and 2276 yuan year on year.

　 （2） Long staple cotton prices continue to rise

In August, the price of domestic long staple cotton continued to rise. At the end of the month, the transaction price of 137 grade long staple cotton was 28000 yuan/ton, up 3500 yuan month on month, which was 9706 yuan higher than the China Cotton Price Index (CCIndex3128B). The price difference was 3204 yuan higher than that at the end of the previous month. The average monthly transaction price of 137 grade long staple cotton was 27120 yuan/ton, up 2983 yuan month on month and down 19100 yuan year on year.

　 （3） International cotton price maintains strong shock

At the beginning of August, cotton prices were under pressure due to market concerns that the US economy was facing recession. As the Federal Reserve expected to increase interest rates again, cotton prices fell below 84 cents/pound. Later, in the USDA monthly report, China US cotton production was significantly reduced. Under the influence of extreme weather such as drought and hurricanes in the United States, the US cotton production reduction expectation was strengthened, and the main contract of ICE cotton was rising all the way, Up to 88.45 cents/pound. The monthly average settlement price of the main contract of ICE cotton in August was 85.65 cents/pound, up 2.7 cents or 3.3% month on month (82.95 cents/pound). China's import cotton price index FCIndexM averaged 97.34 cents per pound in the month, up 2.81 cents month on month; At the end of the month, it was 99.66 cents/pound, up 3.49 cents month on month, and 1% tariff was reduced to 17491 yuan/ton, which was lower than 803 yuan of domestic spot goods in the same period. At the end of the month, the price of cotton at home and abroad increased significantly. As the international price of cotton increased more than that at home, the difference between the internal and external prices narrowed to about 1100 yuan.

（4） The downward transmission of price is not smooth

In August, with the strong rise of cotton prices, cotton yarn prices also had a strong desire to rise, but the market acceptance was insufficient, and the downward transmission of raw material prices was not smooth, and the spot production profit of cotton mills continued to be in a loss state. Traders' inventory is still high, and terminal startup continues to be low. Specifically, the transaction prices of pure cotton yarn KC32S and combed JC40S at the end of the month were 24545 yuan/ton and 27645 yuan/ton, up 445 yuan and 325 yuan respectively from the end of the previous month; Polyester staple fiber was 7570 yuan/ton at the end of the month, up 120 yuan from the end of the previous month, and viscose staple fiber was 12950 yuan/ton at the end of the month, up 350 yuan from the end of the previous month.

　　 2、 Analysis of factors affecting price changes at home and abroad

　 （1） Sales of reserve cotton continued to be fully closed

From July 31 to August 31, reserve cotton sales totaled 256000 tons, with a 100% turnover rate. The average transaction price was 17691 yuan/ton, or 18225 yuan/ton at 3128 yuan. Among them, 15300 tons of Xinjiang cotton were sold at an average price of 17738 yuan/ton, or 18275 yuan/ton at 3128 yuan; The volume of imported cotton reached 240800 tons, with an average price of 17688 yuan/ton, or 18222 yuan/ton at 3128 yuan.

　 （2） Stamp duty reduced by half

On August 27, the Ministry of Finance and the State Administration of Taxation issued the Announcement on halving the stamp tax on securities transactions. In order to activate the capital market and boost investor confidence, they decided to halve the stamp tax on securities transactions from August 28, 2023.

　 （3） Xinjiang Announces the Plan Linked to Quality

The Xinjiang Autonomous Region and the Corps Market Supervision and Administration Bureau have successively issued the Implementation Plan of the Autonomous Region's Cotton Target Price Subsidy and Quality Linked Policy in 2023 and the Implementation Plan of the Corps Cotton Quality Traceability in 2023. It is mentioned in the scheme that in principle, fine wool cotton with a subsidy standard of "Double 29B2" or above can get a quality subsidy of 0.35 yuan/kg (fiber length ≥ 29mm, specific breaking strength ≥ 29cN/tex, micronaire value A or B2).

　 （4） The Corps orderly guided the reduction of cotton planting in secondary cotton suitable areas

This year, the Corps reduced the cotton planting area by 1.36 million mu and increased the grain planting area by 1.34 million mu. The Corps has made it clear that by the end of 2023, 16 regiments, including the 24th Regiment of the Second Division and the 41st Regiment of the Third Division, will all withdraw from cotton planting. The cotton planting area of 5 regiments, including the 5th Regiment of the 1st Division and the 69th Regiment of the 4th Division, will not exceed the planting area of the regiment in 2020.