Higher cottonseed price exerts resonance effect on cotton linter

Cotton linter price is gradually moving upward, which is close to the peak in the beginning of Mar. What is the driving force of the market?

1. High cottonseed price amid tight supply pushes up cotton linter

Cottonseed supply shortage is the major cause of rising price. It is well known that besides the application in feedstuffs, cottonseed is mainly procured by cottonseed oil and delinting plants and Xinjiang-origin cottonseed is the major source of cottonseed oil plants in Chinese inland. The new supply of cottonseed is limited in the later period of 2020/21 crop year, with prices rising gradually. Now cottonseed in Xinjiang is around 3,180-3,240yuan/mt. In Shandong and Hebei, the price is around 3,500yuan/mt and Xinjiang-origin one is sold at 3,650-3,700yuan/mt locally. The price has gained almost 400yuan/mt since Apr.

2. Rising commodities and speculation boosts cottonseed market

K line chart of palm oil (on weekly basis)

Cottonseed oil, palm oil and soybean meal futures keep going up, pushing up cottonseed oil and cotton dreg prices, so cottonseed oils show higher enthusiasm for cottonseed procurement. Oil plants in Chinese inland mainly purchase cottonseed from Xinjiang, but the price of cottonseed has been rising after the Labor Day holiday, so the uptrend of commodities and cotton by-products is an important factor of triggering the increase of cottonseed price.

3. Demand growth is the foundation of rising cotton linter price this year

Cotton linter is mainly applied in cotton linter pulp, specialty pulp and refined cotton. Due to tighter supply of dissolving pulp in the first half of this year, some VSF plants use cotton linter pulp as substitute, triggering sharp increase of cotton linter demand. When the consumption in specialty pulp, refined cotton and other applications is largely stable or slightly increases on yearly basis, the hiking demand from staple-grade cotton linter pulp is the major driving force of higher cotton linter price this year and the increment is predicted to be around 100kt.

To sum up, cottonseed price may linger at high level in the short term when the supply is tight in the later period of 2020/21 crop year. Coupled with rising prices of related commodities and market speculation, cotton linter producers are also eager to quote firmly.