Textile mills in China are switching payment terms from cash on delivery to 20 days credit. The move is a clear sign mills believe prices are topping and on their way down. Conversely, merchants are happy to hold stock knowing most mills are keeping lower inventories and must continue making purchases. Plus, merchants believe the amount of supply pushed into the reserves has created a shortage of high grade cotton. Once the stimulus package hits textiles (and it will) mills may wish they had been making steady purchases all along.
200/400 type merchants are halting seed cotton purchases over the shortage of quality product combined with the rising cost, making it unprofitable to tender.
Some rumors floating about additional Xinjiang purchases. One tends to think the government keeps this mixture stirred up intentionally just to see how the market reacts.
As farmers around the country are pondering planting decisions in the coming weeks, cotton growers in Shandong are being told planting season may be delayed by as much as a week due to a lack of precipitation. Shandong growers normally plant in mid April. Now, it appears they may be in the fields closer to the lh of the month.
Soybean crushers in the northeast and some smaller ones on the coast are taking down time until crushing margins improve. Import beans continue to trade at a premium to domestic ones, though the recent resurgence of commodities may see this spread narrow quickly.
As corn has been removed from the market via the reserve purchases, it will be interesting to watch how the logistics will sort out with the product being stored in the northeast and the primary end users are on the coast and in the south.
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