From the quotations of cotton traders in Qingdao, Zhangjiagang and other places, the basis difference of US cotton 51-536 (strong 28GPT) and ME41-536/37 (strong 28GPT) for the December/January shipping date from November 29th to 30th are respectively They are 5.10-5.30 cents/pound and 6.7-7.0 cents/pound (spot quotations are ICE2103+basis, and there are still a small number of cotton companies that use ICE2012+basis); while ME41-3/41-4 37/38/ 39 (strong 28GPT) basis reaches 8.05-8.55 cents/pound (December shipping schedule). Overall, the U.S. cotton basis has remained strong since late November. Even if old/large customers make inquiries and purchases, international cotton merchants and trading companies do not have much room for negotiation. According to the survey, the current supply of US cotton and Brazilian cotton for the December/January shipping schedule is relatively sufficient, and the color grades are mainly 51-5, 41-5, M, SLM, etc., but not only the fiber length generally reaches 36-38, but also the strength 28-31GPT, horse value G5, overall spinnability is good, suitable for spinning medium to high count cotton yarn.
However, according to feedback from traders and bonded warehouses in major cotton ports, U.S. cotton spot price inquiries and shipments have not been smooth since mid-November. The situation of stalemate and stalemate between buyers and sellers has continued, and individual “basis differences” have not been smooth. Traders with “high prices, no profit concessions, and low supply of goods” even had deserted transactions. The stocks of US cotton, Brazilian cotton, Indian cotton and other stocks at the port have rebounded slightly (bonded + non-bonded) compared with before mid-November. Why are traders still unwilling to lower the basis of US cotton and reduce sales pressure as soon as possible despite slowing shipments and growing inventories? Industry analysis has the following three reasons:
First, as the global COVID-19 vaccine enters the widespread vaccination stage and China, Pakistan, Vietnam and other countries continue to vigorously sign contracts to purchase US cotton and other positive support, the momentum of ICE’s rise is biased. Second, in addition to India and Pakistan’s expectations for a sharp reduction in cotton production and quality decline in 2020/21, the concerns of some institutions and investors about the production and export capabilities of U.S. cotton this year have not weakened; third, due to the Brazilian main The cotton-producing area of Mato Grosso has continued drought and lack of rain, and cotton planting has been delayed on a large scale. Therefore, the basis difference of Brazilian cotton in 2019 and 2020 is very strong; coupled with the extremely high Australian cotton “adding fuel to the flames”, traders have almost no The willingness to lower the basis difference; fourth, the appreciation of the RMB has narrowed significantly, signs of two-way fluctuations have emerged, and the cost of contracted imports of foreign cotton has stabilized. </p
