After the National Day holiday, machine-picked seed cotton prices tick up quickly in North Xinjiang, so new cotton costs have increased by nearly 2,000yuan/mt gross weight compared to that before the holiday. The increment of hand-picked seed cotton in South Xinjiang is smaller than that in North Xinjiang. Currently, picking of machine-picked seed cotton in North Xinjiang is drawing to a close, and prices stabilize, while harvests of hand-picked seed cotton in South Xinjiang are still going on, and seed cotton prices are still on the rise. The procurement of machine-picked seed cotton in North Xinjiang and hand-picked seed cotton in South Xinjiang will be analyzed in details.

1. Procurement situation of machine-picked seed cotton in North Xinjiang

North Xinjiang seed cotton starts to be transacted in late Sep, and purchasing volumes are limited before the National Day holiday, as ginners have not started to purchase actively, and seed cotton prices are low, with the costs around 11,100yuan/mt gross weight on theory. After the holiday, ginners begin to purchase on large quantity, and during the procurement, yield in North Xinjiang is expected to reduce this year as defoliant is operated earlier, while ginning capacity increases in North Xinjiang, so with the higher competition, ginners are eager to purchase seed cotton after the holiday. Seed cotton prices tick up quickly then, and ginning costs to lint rise to 12,700yuan/mt gross weight on theory, up about 2,000yuan/mt from Sep 30. In addition, as the machines increase and the picking speeds up, the harvests in North Xinjiang are basically complete, and prices stabilize at 5.1-5.2yuan/kg, some higher at 5.3-5.4yuan/kg in Kuytun.

For the seed cotton of Xinjiang Production and Construction Corps (XPCC), the increment of seed cotton is smaller. If the XPCC-origin seed cotton is sold to local ginners, growers cannot get the subsidy, so the XPCC-origin seed cotton prices are under control. The new cotton costs are about 11,400-12,000yuan/mt gross weight, lower about 700-1,300yuan/mt compared with the non-XPCC cotton.

2. Procurement situation of hand-picked seed cotton in South Xinjiang

Hand-picked seed cotton in South Xinjiang sees smaller increase compared with machine-picked seed cotton in North Xinjiang. Currently, the hand-picked cotton costs are about 12,800yuan/mt gross weight, up about 1,300yuan/mt from Sep 30. Purchase prices of seed cotton score at 5.68yuan/kg. According to ginners, there are about more than 20 days to pick the cotton crops. As the hand-picked cotton is with high micronaire this year and ginners lack confidence towards late market, more ginners turn to produce cotton for wadding, so its seed cotton prices continue to rise.

Currently, prices of seed cotton are mostly at 5.8-6yuan/kg in Aksu and Kashgar, some above 6yuan/kg. For XPCC and some large ginners, prices are within 5.6-5.7yuan/kg.

3. Hedging space of new cotton and spot cotton market situation

In South Xinjiang, the new cotton is mainly for wadding, with favorable sales and high prices, so ginners basically have no stock at hand. Therefore, though price spread between hand-picked cotton costs and ZCE major cotton contract is large, the cotton for spinning on hedging is limited. After machine-picked seed cotton is harvested, traders have large hedging space, so the shorts enter the futures market, leading to sharp fall of ZCE cotton futures. Since the National Day holiday, machine-picked seed cotton prices move up quickly, leading to lower hedging space. Currently, the harvests of machine-picked seed cotton are drawing to a close, and prices stabilize, while hand-picked seed cotton prices keep upward, and its costs are higher than that of machine-picked ones.

For new cotton on spot market, ginners reflect that micronaire of hand-picked cotton is high this year, mostly above 5.0NCL, and cotton with strength above 29gpt is also limited. Offers that are ginned previously are mainly at 12,350-12,500yuan/mt conditioned weight, and grade-2128 cotton that is ginned at present is ay 12,800yuan/mt conditioned weight. Quality of machine-picked cotton is relatively good overall in North Xinjiang, micronaire 4.5-4.8NCL, trash content within 2%. New cotton offers are stable to rise mostly under higher costs, but with the on-going consumption, the cotton prices may gain more support from the costs.

Summary: currently, ginning costs of machine-picked cotton have risen to 12,700yuan/mt gross weight in North Xinjiang on theory, up about 2000yuan/mt from Sep 30, and that of hand-picked cotton are about 12,800yuan/mt on theory in South Xinjiang, up 1300yuan/mt from Sep 30. The picking of cotton crops in North Xinjiang is drawing to a close from Oct 20, and seed cotton prices have limited upward space, while prices of hand-picked seed cotton in South Xinjiang are still on the rise. Under current costs, new cotton is hard to do hedging on the futures market. With the consumption of previous low-costs cotton, cotton prices may gain some support from the costs.