How will Xinjiang seed cotton prices evolve in 2023/24 season?

There are rumors at the end Aug of 2023 about a seed cotton purchase price of 9.5-10yuan/kg in Bachu of Xinjiang (some market players state that it is a purchase price from vendor in the cotton field). Nevertheless, we have confirmed with representative ginning factories in Bachu about this price. Ginners reflect that no ginning factories have started to purchase seed cotton by now in local market, and the expected starting time is around Sep 10. Ginners in Makit also state that they will start to purchase in early Sep, and the seed cotton price may be around 8.8yuan/kg, but the actual price will depend on factors such as orders and local purchasing conditions. Then, how will 2023/24 Xinjiang seed cotton prices evolve?

According to feedback from surveyed factories, if we calculate the intended purchase price for hand-picked seed cotton at around 8.8 yuan/kg, the cost will be approximately 18,200yuan/mt gross weight based on a cottonseed price of 3.3 yuan/kg. Currently, the spot market transaction price for machine-picked cotton, 28mm and 28gpt, ranges from 18,300 to 18,600yuan/mt. Therefore, if the purchase price for hand-picked seed cotton is within 9yuan/kg, the cost will be comparable to the spot price. At the same time, some factories have expressed that a purchase price of around 9.5yuan/kg (seed cotton for wadding) can also be accepted, as long as there are orders. Based on the current cottonseed price, the cost will be around 19,300yuan/mt, which is still acceptable. However, a purchase price of around 10 yuan/kg would result in a cost of more than 20,000yuan/mt, which is not affordable.

Then based on current spot cotton price and the upper limit of what ginners can bear, the opening price of hand-picked seed cotton is possible to be at 8.8-9.5yuan/kg, and considering the price difference between hand-picked and machine-picked seed cotton, purchase price of machine-picked seed cotton may be 8-8.5yuan/kg, with a cost of 18,000-20,000yuan/mt. However, this assessment is based on current ginners' expectations, and the actual early purchase price still needs further monitoring.

According to previous years' price in early arriving period, the current expected purchase prices for hand-picked and machine-picked seed cotton are similar to those of the 2021/22 season. However, in the 2021/22 season, the highest purchase costs for ginners reached around 25,000 to 26,000yuan/mt, and most purchase costs were above 23,000yuan/mt. Many ginners suffered significant losses that year. This year, ginners are more cautious about seed cotton purchases, and bank lending policies are also more cautious. The highest purchase price for the season may be lower than that of the 2021/22 season. Whether the purchase price will start high and then decline or rise and then fall throughout the season will depend on the dynamics of intensive arrivals.