SunSirs: New Cotton Was Concentrated on the Market, and Cotton Prices Fluctuated Weakly in October

Price trend

Since October, domestic cotton prices first fell and then rose. In the first half of the month, there was a large expectation of increased supply, coupled with a drop in the purchase price of seed cotton. Cotton prices have been falling since National Day. In the second half of the month, as the cotton harvest in Xinjiang was nearing its end, the situation of increased production was basically confirmed. Due to the influence of replanting and high temperature weather during the growth period, the yield in some areas of southern Xinjiang was lower than expected. Near the end of the month, the purchase price of seed cotton in Xinjiang had risen. At the same time, the macro-favorable factors supported a slight recovery in cotton prices.

According to the commodity market analysis system of SunSirs, as of October 29, the spot price of 3128B grade cotton lint was 14,842 RMB/ton, down 0.94% from the previous month.

Analysis review 

In terms of futures, Zhengzhou cotton showed an upward trend. The purchase price of seed cotton rose near the end of the month. The increase in processing costs and futures hedging range provided strong support for cotton prices. As of the 29th, the settlement price of Zhengzhou cotton's main contract was 13,585 RMB/ton, up 1.65% month-on-month.

On the macro level, the approval of the "15th Five-Year Plan" proposal has further strengthened market confidence. In addition, the US and China reached a preliminary consensus on a number of important economic and trade issues during the economic and trade consultations held in Kuala Lumpur, and the expectation of a Fed rate cut has increased, providing support for the rise in cotton prices.

Cost: Rainfall in Xinjiang in early October resulted in high cotton moisture content. Processing companies maintained strict quality control, coupled with increased harvesting volume and declining international cotton prices, resulting in a purchase price of machine-picked cotton ranging from 5.6 to 6.1 yuan per kilogram. Later, as weather improved, the moisture content of Xinjiang seed cotton decreased, prompting active procurement by processing companies, leading to a steady increase in seed cotton prices.

As the month drew to a close, harvesting in northern Xinjiang entered its final stages, while southern Xinjiang remained in its peak season. This year, drought and high temperatures in parts of southern Xinjiang had caused premature aging of cotton. Based on the actual yield of cotton already harvested and sold, the yield had fallen short of expectations. Consequently, Xinjiang processing companies continued to raise purchase prices, with prices mostly ranging from 6.3 to 6.4 RMB per kilogram, with a maximum of 6.5 RMB per kilogram. Prices in northern Xinjiang ranged from 6.2 to 6.3 RMB per kilogram. Hand-picked cotton prices have remained stable at 6.9 to 7.2 RMB per kilogram.

Internationally, the US government shutdown had been ongoing for nearly a month, and the lack of macroeconomic dataincreased market uncertainty. International cotton prices hit a six-month low. However, after the previous dip, US President Trump expressed optimism about a US-China trade deal. Easing trade tensions boosted sentiment, and expectations of a Federal Reserve rate cut continued to grow, leading to a slight rebound in ICE cotton futures. As of October 28, the main ICE cotton futures contract settled at 65.05 cents/pound, essentially unchanged from the previous month.

From an industry perspective, the US cotton harvest entered its peak season, and India's new cotton procurement process had also accelerated. Weather conditions in both the US and India are expected to be generally favorable for cotton harvests over the coming period, leading to increasing supply pressure. Due to the absence of data such as the USDA's monthly supply and demand forecasts due to the government shutdown, the market lacked clear guidance. The US cotton market is expected to remain volatile in the short term.

On the demand side: With the gradual arrival of new cotton, the market was well supplied, and textile companies were mostly purchasing on an as-needed basis. As of October 29, mill operating rates remained generally stable across all regions. Large mills in Xinjiang operated at around 90%, while large enterprises in Henan average around 70%. Large mills along the Yangtze River in Jiangsu, Zhejiang, Shandong, and Anhui all operated at around 70%. The domestic cotton yarn market was generally stable, with new cotton costs providing a floor. However, downstream demand had not fully followed suit, resulting in mediocre sales. With the onset of the off-season, some textile companies were reporting a lack of new orders and were temporarily focusing on shipping.

Market outlook

As domestic seed cotton procurement entered its mid- to late-stage stages, lint costs were gradually solidifying, but hedging pressure remained above cotton prices. Simultaneously, commercial inventories were increasing, and supply-side pressure was gradually emerging. On the demand side, downstream demand was sluggish, with insufficient new orders. Cotton prices are expected to remain range-bound in the short term, with attention focused on changes in international trade and downstream demand.

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