The start of a new upward trend for cotton linter?

Recently, seed cotton procurement is coming to an end. Cottonseed market has shown a strong trend with prices surging significantly, while cotton linter prices have also followed suit. What are the reasons behind this round of price increases, and is it the start of a new upward trend?

Since mid-Oct, cottonseed market has gradually stopped falling and stabilized, with prices starting to recover. It has risen rapidly since late Oct to early Nov. The price of cottonseed in Xinjiang has increased from 2,100-2,200yuan/mt to 2,300-2,400yuan/mt in early Nov (higher at 2,450yuan/mt), representing a cumulative increase of about 200-250yuan/mt. The main reasons are as follows:

1. After new cottonseed arrives at the market, prices have fallen sharply (bottoming out at 2,100yuan/mt), creating strong momentum for a low-level rebound.

2. On Oct 30, the heads of China and the United States met in Busan, South Korea, agreeing to reduce tariffs on each other. The macroeconomic environment turned positive, market expectations improved, and there was a certain speculative sentiment.

3. Seed cotton purchasing has entered the final phase. Currently, harvesting in northern Xinjiang has basically been completed, while southern Xinjiang is also in the finishing stage. Ginners have processed more than half of their output, leading to increased sentiment among cottonseed market participants to support prices.

4. Recently, cottonseed meal market has recovered. In addition, the demand for cottonseed replenishment by cottonseed oil and delinting mills at the end of the year has increased, providing support for cottonseed prices.

Affected by various adverse factors, cotton linter market has experienced a sharp decline this year. Around mid-Sep, prices were near a ten-year low. Subsequently, driven by favorable macroeconomic conditions and its own supply-demand dynamics, prices gradually stopped falling and recovered. However, dragged down by weak downstream demand, the overall price increase remained sluggish. Currently, the price of cotton linter for industry-grade refined cotton in Xinjiang is around 3,500-3,600yuan/mt inland and 3,200-3,300yuan/mt in Xinjiang, with a cumulative increase of 200-250yuan/mt, similar to the price increase of cottonseed.

In summary, driven by multiple positive factors, cottonseed market has recently shown a strong trend with rapid price increases, with a cumulative increase of about 200-250yuan/mt in Xinjiang cottonseed prices. Cotton linter market has also recovered somewhat and is expected to keep strong in the short term. However, due to the weak recovery of downstream cotton by-products, especially refined cotton market, and low willingness to chase high prices, there is no support for a continuous sharp upward movement in cottonseed or cotton linter prices for the time being. The logic behind the recent price increase is that cottonseed and cotton linter prices were relatively low previously, and market sentiment is now inclined towards upward movement. This should be mostly viewed as a restorative "oversold rebound."