The entanglement between cotton meal and soybean meal has increasingly affected the price trend of cotton by-products in recent years. Sometimes cotton meal looks at the “face” of soybean meal and fluctuates with the price of soybean meal. Sometimes, the price of cotton meal drops again. Start soybean meal and go your own independent route. What is the relationship between the two and what impact will it have on the price trend of the cotton sub-market this year? Let us discuss this.
The use of cotton meal is the cornerstone of the price trend of cotton meal and soybean meal
We need to understand the use of cotton meal. There are two use categories of cotton meal. One is the basic use of cotton meal, which is also the biggest use, that is, it is a provider of protein like soybean meal. As a substitute for soybean meal, the price advantage is the greatest value of cotton meal; because my country needs to import soybeans in large quantities, Shortage or high prices have always been the weakness of China’s feed industry. As a cheap protein provider, cotton meal protein is a good substitute for soybean protein. The second is the special use of cotton meal. It can replace fish meal or provide protein in aquatic products, and improve the quality and production of milk in dairy farming. This use is the urgent need for so-called cotton meal or cottonseed.
Preliminary period of the year: cotton meal prices follow the price of soybean meal to reduce inventory cost-effectively
From September when cotton meal is on the market to May of the next year, this This is the season when cottonseed is on the market and cottonseed oil factories are processing intensively. The climate is colder and aquatic products are used less. At this time, the value of cotton meal is mainly reflected in its use as a substitute for soybean meal. At this stage, the price of cotton meal fluctuates up and down with soybean meal on the basis of maintaining cost performance. Cost performance is king. This stage is the stage for cotton meal to digest inventory, and it is also the basis for the independent market of cotton meal in the later period.
Later part of the year: low inventory brings independent market situation of cotton meal
Since May, a large number of aquatic feeds have been launched, while cotton meal has gone out in the first half of the year. Due to the gradual reduction of inventories, oil plants have been shut down one after another, and there is less cotton meal stock on the market. Cotton meal has started its own independent market, getting rid of the suppression of soybean meal, and the price has risen. This stage is based on the large-scale destocking of cotton meal in the early part of the year.
Preliminary period of 2020/2021: Soybean meal price trend disrupted the follow-up of cotton meal
First, there was no low price and there was no centralized procurement by feed mills Chance. Secondly, cotton meal does not have a good cost performance, and feed mills have no motivation to adjust the formula and increase the proportion of cotton meal used.
In recent years, low prices for cottonseed and cottonseed have basically appeared during New Year’s Day and Spring Festival. The low prices have enabled cottonseed and cottonseed to be sold quickly, and stocks have been transferred from Xinjiang to downstream consumers. However, this year, the launch of cotton meal coincided with the expansion of soybean meal and the external market. Cotton meal has been rising all the way, and it has not yet reached a low price. Cotton meal has been launched at a high price, and its cost performance and availability are unstable. Feed mills have no motivation to adjust the formula. Feed companies currently use very little cotton meal. To make matters worse, as prices continue to be high, feed mills have not found opportunities to increase their inventories. The inventories of cottonseed or cotton meal are in the hands of oil mills, even ginners and cotton farmers in Xinjiang.
Later period of 2020/2021: Cost-effectiveness is urgently needed and inventory entities are difficult to transfer.
This year’s high inventory of cotton meal ultimately requires improved cost-effectiveness to digest. There are two ways to improve cost-effectiveness. Either way, the price of soybean meal will continue to rise, or the price of cotton meal will fall. From the current point of view, the price increase of soybean meal is “looking forward to the plum blossom to quench the thirst”, and it is the initiative to lower the price of cotton meal.
First, as time passes to a later stage, the inventory entities may not be able to be transferred. The upstream has made inventory for the downstream. When the inventory is sufficient, the downstream has no pressure or motivation to build inventory. In the later part of this year, inventory is likely to remain in Xinjiang oil mills or cotton ginning mills. Feed mills maintain a strategy of purchasing as needed to reduce inventories and purchases.
Second, continued inventory brings continued price pressure. If the inventory cannot be transferred, continued inventory will bring continuous price pressure, and Xinjiang cottonseed oil mills are facing continued price pressure. The price pressure will further weaken the motivation of downstream sellers and form a closed loop of inertia.
Thirdly, this is the basic feature and main reason of the last round of oil plant reshuffle. This was the key to the industry reshuffle in the past few years. Oil plants were unable to digest large amounts of inventory, and prices continued to fall. In the end, oil plants with large inventories suffered losses and even faced bankruptcy.
<br
