Why cottonseed and cotton linter prices plummet recently?

Since early-to-mid Jun, cottonseed and cottonseed oil prices have given up earlier gains with widening decline and cotton linter prices have even falling constantly amid thin trade.

Affected by the Fed's aggressive interest rate hikes and geopolitical conflicts, coupled with the repeated epidemics and the sourcing ban on Xinjiang goods, bulk commodities have fluctuated violently and China cotton market covered with pessimism has also witnessed sharp price decline. Therefore, cottonseed oil plants who stand on the sidelines have suspended the procurement of cottonseed with the price falling rapidly. Moreover, soybean oil and palm oil prices have dived, which has rapidly dragged down cottonseed oil price, thus cottonseed is falling faster. In the past half a month, cotton price has plummeted by 3,000yuan/mt and cottonseed has lost ground by almost 400yuan/mt.

In order to curb nearly 40-year high inflation growth, the pace of the Fed's aggressive interest rate hikes is getting faster. Some people believe that the US is greatly accelerating the interest rate hike and the reduction of the balance sheet, which will burst the economic bubble, reduce consumption, and suppress market demand, resulting in increasing risks of economic "hard landing" has increased. There are more worries over the global economic recession and there has been deeper decline of bulk commodities recently. Coupled with the interference of ban on Xinjiang goods, the price of cottonseed has fallen rapidly and cotton linter price has continued to decline by around 1,000yuan/mt since Apr.

The risk aversion on the market has increased with the influence of macro economy and the epidemic as well as the ban on Xinjiang goods. Cotton and cottonseed oil prices had slumped with volatile bulk commodities and cottonseed price has fallen rapidly. Cotton linter price has been declining and the weakness is not expected to be reversed in the short run.