Cotton linter follows up in line with cottonseed

Cottonseed price has gradually stopped falling and bounced up since mid-to-late Dec. The price has increased faster since New Year’s Day holiday, which is almost 4-year high at present. Cotton linter producers are unwilling to sell goods at low prices under strong support from cost, with prices going up and are expected to keep firm in the short run.

The main reasons of soaring cottonseed prices are as below: (1). The procurement and processing of seed cotton in North Xinjiang has almost finished recently and less seed cotton is processed in South Xinjiang and outside Xinjiang, so there is insufficient supply of cottonseed. (2). Pastures build up more stocks for New Year’s Day and Chinese Lunar New Year holidays and cottonseed oil as well as delinting plants gradually purchase cottonseed. Coupled with the influence of the epidemic, there are few vehicles available amid high freight cost from Xinjiang to other provinces and cottonseed procurement price is hard to be talked down. (3). Under the background of abundant liquidities, commodities keep rising in turns with more bulls in external market. Prices of cotton by-products are rising fast, especially continued stronger performance of cotton dreg, further pushing up cottonseed prices.

Cottonseed price has been rising since the end of Dec and most plants now become reluctant sellers with stronger bullish sentiment. Some of them hoard up stocks for around 10-20kt, with the higher volume of more than 50kt. Most of them who are bullish about cottonseed market outlook will decide whether to further build up stocks based on the market after Chinese Lunar New Year. Now cottonseed in Xinjiang is around 2.5-2.56yuan/kg and Shandong and Hebei-origin one is at 3.04-3.12yuan/kg, rising more than 200-300yuan/mt since New Year's Day.

Cotton linter cost gains stronger support from high cottonseed price and suppliers who are unwilling to sell linters at low prices adjust up prices. However, some cotton linter producers have tighter funds with rising feedstock cost and more of them suspend operation with the approach of Chinese Lunar New Year. The processing is expected to gradually stop around Jan 20.

Cottonseed supply is tightening with the end of seed cotton processing and there is bigger price increase against the backdrop of more bullish factors in external market as well as rising commodities. Cotton linter prices are also picked up amid high cottonseed cost. In recent years, the motivation of cotton linter price change is from feedstock cost instead of downstream demand. The price of cottonseed is still predicted to increase in the short term and cotton linter price market will also keep firm or be stable to stronger.