Why cottonseed fail to push up cotton linter price?

The arrival of new cottonseed is increasing and the price stabilizes after falling, hovering at relatively high level. However, cotton linter price has been dreary amid lackluster demand, which is close to the point that just started to rise at the beginning of last year.

Affected by geopolitical conflicts this year, the global energy crisis and food crisis have intensified. Under the background of strong international oil, soybean oil and soybean meal, the Chinese cottonseed oil and cotton dreg markets have taken advantage of the trend this year, especially cotton dreg prices that have hit a 10-year high. Since the beginning of 2022/23 crop year, cottonseed oil plants in Shandong, Hebei and Xinjiang have increased the procurement of cottonseed. Coupled with the reduction of vehicles leaving Xinjiang resulting from the epidemic and the rise in freight costs, the arrival of Xinjiang-origin cottonseed has been delayed, bolstering cottonseed price at a high level in Chinese inland even if during the arrival of new resources. At present, the price of cottonseed is 2,750-2,800yuan/mt in northern Xinjiang, and 2,850-2,900yuan/mt in southern Xinjiang. The price of high-quality cottonseed in the inland is mostly around 3,700yuan/mt, which is respectively 400yuan/mt and 800yuan/mt higher than that at the beginning of last year.

The cost of cotton linter is increasingly supported by the relatively higher price of cottonseed. However, under the poor macro environment, trades are flat in cotton linter market recently, especially when the consumption of staple-grade cotton linter pulp mills is reduced and there is less demand from refined cotton. The price of cottonseed in Xinjiang is around 2,800yuan/mt, and cotton linter for industry-grade refined cotton is around 3,500yuan/mt. In Chinese inland, cotton linter for industry-grade refined cotton has dropped to 4,000-4,100yuan/mt, which is just 100-200yuan/mt higher than that of early 2021.

To sum up, the procurement and processing of seed cotton is relatively slow this year due to the epidemic in Xinjiang and reluctance of cotton growers to sell the goods. The intensive arrival of cottonseed has prolonged, especially in the context of strong international oil, soybean oil and soybean meal. The price of cottonseed oil and cotton dreg stays at high level and cottonseed oil plants has enhanced ability to absorb high-priced cottonseed, which has strongly underpinned cottonseed market. However, cotton linter market activity is low, which is dragged down by demand. The price also lacks upward momentum and it is expected to remain in a stalemate in the short run.