Why Does Zheng Cotton Warehouse Receipt Drop Sharply Year On Year?

At present, the harvest and sales of seed cotton in Changji, Kuitun, Tacheng and other major cotton producing areas in Northern Xinjiang have been basically closed. The sales progress of hand picked cotton in the three major cotton producing areas in southern Xinjiang has also exceeded 65%, and the harvest progress of machine picked cotton in southern Xinjiang is not less than 50%. With the overall decline of seed cotton purchase price and lint current price in late October, not only the enthusiasm of farmers to sell seed cotton was high, but also the reluctance of cotton ginners and cotton traders to sell seed cotton was also significantly reduced.

According to statistics, as of November 5, the cumulative lint processing capacity of Xinjiang in 2020 / 21 is 2183900 tons (1291800 tons in the autonomous region and 892100 tons in the Corps), which is significantly higher than that in the same period of last year. As of November 5, the cumulative notarization and inspection of Xinjiang cotton in 2020 / 21 was 1.63231 million tons, an increase of 23292 million tons compared with the same period of 2019 / 20, with a year-on-year increase of 17.19%. This shows that the characteristics of Xinjiang cotton in this year are "early listing, fast harvesting and urgent processing".

It is somewhat puzzling that as of November 5, there were only 4436 warehouse receipts and 969 effective forecasts in Zhengzhou, while in the same period of 2019 / 20, Zhengzhou cotton warehouse receipts and effective forecasts reached 10420 and 2102, respectively, down 57.43% and 53.9% year-on-year. In 2020 / 21, the number of cotton warehouse receipts and the number of effective forecasts in Xinjiang will be cut short. This shows that not only the proportion and enthusiasm of hedging of cotton processing enterprises in Xinjiang is not high, but also the cotton traders and futures companies have not entered the market in a large scale.

What are the reasons for the sharp decrease of cotton in warehouse orders? The author summarizes the following points: first, the domestic and foreign sales orders in October exceeded the expectation and the worry about the quality index of Xinjiang machine picked cotton in 2020 / 21, which led to the rapid outflow of Zhengzhou cotton warehouse receipts in 2019 / 20, and the textile enterprises and middlemen seized the following warehouse receipts; second, the public inspection results of mechanical cotton picking in Northern Xinjiang in 2020 / 21 were not strong, which showed short fiber, high horse value, low breaking strength, and the proportion of "double 28, double 29" Compared with the previous two years, there are more batches that do not meet the conditions for generating warehouse receipts or with high discount ratio, and the cotton ginning plant is not active in hedging; thirdly, the consolidation time of zhengmian cf2101 contract above 15000 yuan / T is relatively short, and some of the ginning plants have missed the opportunity of hedging in the range of 15000-15300 yuan / T (the current disc price of 14300-14500 yuan / T is close to the cost of machine picking cotton, or even "hanging upside down"); Fourth, due to the weak early flower index of mechanical cotton picking in 2020 / 21, and the general reluctance of Xinjiang cotton processing enterprises to sell, traders and futures companies have little opportunity to sign contracts and take delivery of goods, and passively choose to wait and see with currency; fifthly, the warehouse receipt generation is relatively slow due to the upgrading of epidemic prevention and control, the transportation vehicles in some areas need to "work with certificates" and the delivery warehouse itself.