Will price drop of cotton weigh on cotton linter market?

Affected by multiple factors recently, ZCE cotton futures have experienced a continuous decline, and there has been a significant drop in Chinese cotton spot prices. However, the market prices for cottonseed and cotton linter have remained relatively stable, not following the downward trend of cotton and even showing some resilience.

In 2024/25 crop year, Chinese cotton production has surged, with processing volume increasing by over 850kt year-on-year. In Xinjiang, the cumulative processing of new cotton has reached 5.3 million tons, an increase of over 18% compared to the previous year. Due to the unexpected increase in cotton production, combined with weak demand from downstream sector and cautious purchasing attitude among textile enterprises, ZCE cotton futures have continued to decline recently, approaching the previous low from the end of Aug. Cotton spot prices also continued to drop, with ZCE cotton futures falling from around 14,000yuan/mt at the beginning of Dec to about 13,400yuan/mt currently. At the same time, the spot price of cotton 3218 has decreased from 14,600yuan/mt to around 14,000yuan/mt, with a decline of over 600yuan/mt. Compared to the price of 15,500yuan/mt at the end of Sep, the drop has exceeded 1,500yuan/mt.

Amid the continuous decline in Chinese cotton prices and a significant drop in soybean oil and meal futures, the cottonseed market has remained relatively strong. This is primarily because the processing of seed cotton in Xinjiang has recently come to an end, leading to increased shutdowns at ginners and limited cottonseed stocks. The producers have a strong willingness to maintain prices, with current cottonseed prices in Xinjiang around 2,150-2,200yuan/mt and 2,700yuan/mt inland, showing little price fluctuation. The cotton linter market has seen limited ups and downs, mainly due to active purchasing and restocking by downstream enterprises, with more pre-sales by delinting plants. From early Sep to mid-Nov, prices rebounded by about 1,000yuan/mt, and after mid-Nove, prices have remained stable.

In summary, due to the significant surge in Chinese cotton production that has exceeded market expectations, and under the heavy pressure of overall supply, ZCE futures and Chinese cotton spot prices have continued to decline, showing signs of gradually bottoming out. However, due to the substantial differences in supply and demand fundamentals, the cottonseed and cotton linter markets have remained stable recently, with prices not following cotton further down, and producers have a strong willingness to maintain prices, with the expectation of minor fluctuations in the short run.