After three days of bidding and storage, the price and quantity of incoming cotton reserves were basically in line with market expectations, and the market did not rise as much as predicted. The logic of reducing incoming supply to support rising cotton prices is also self-defeating. Of course, the rotation work has just begun, and it is difficult to judge prematurely what “black swan” events will occur in the market in the future, but the willingness of companies to hand over deposits at least shows that the profits from the current deposits are considerable.
Based on the market situation of Zheng Cotton, when the rotation work started, the market price was in a downward trend, which invisibly brought substantial benefits to the distribution and storage. After all, Zheng Cotton, as a weather vane, always affects future spot prices. When cotton prices fall, whether it is direct sales of spot goods or basis prices, profits will decrease. At this time, deposit has added another option for enterprises.
On December 3, the average transaction price of reserve cotton was 13,232 yuan/ton, with the highest transaction price being 13,319 yuan/ton and the lowest transaction price being 12,879 yuan/ton. A friend who just inspected cotton from Xinjiang told the author that the company’s profit on delivery can now reach 500-600 yuan/ton. The current spot price of grade 3128 cotton in the market is 13,000 yuan/ton (official weight, no premium or discount). The storage price is not only higher than that, but also has premiums and discounts, making it more affordable at a glance. The sales price determined by traders is only 12,800-12,900 yuan/ton. Therefore, regardless of spot sales or basis price, for some companies, the profit is less than that of delivery.
If the warehouse receipt is canceled and then delivered for storage, the profit will be even more considerable. During the decline in market prices, companies not only earned profits from short selling on futures, but also earned spot profits.
At present, delivery bidding companies are concentrated among large traders, and there are very few ginning companies. The friend from Xinjiang said that due to strict requirements on the quality and packaging of cotton for storage, the cotton processed by some companies cannot meet the standards for storage. For example, the wheel-in details stipulate that cotton packaging is required to be bundled with cotton cloth. The friend said that a considerable number of companies in Xinjiang use inner bundling methods to produce and process cotton, and some companies use plastic packaging methods, which do not meet the delivery standards.
This year, the purchase price of hand-picked cotton by some enterprises in southern Xinjiang is high, resulting in high lint costs and unclear delivery and storage advantages, which also limits the number of rotations. Overall, as long as there are no major changes in the domestic and foreign markets, the rotation will continue in an orderly manner. Otherwise, the circuit breaker mechanism will be activated to fully play the role of protecting domestic textile enterprises. </p
