On March 10, against the backdrop of bullish data in the new USDA monthly report, multiple ICE cotton futures contracts unexpectedly fell to their limit. The cotton substitute polyester sector also plummeted. Under internal and external attacks, the main contracts of Zheng cotton and cotton yarn fell all the way after opening on Wednesday, with the lowest reaching 15,330 yuan/ton and 22,865 yuan/ton respectively, basically giving up 80% of the previous increase.
The supply and demand balance sheet is improving, and the external market unexpectedly fell by the limit
With the February USDA forecast of global planting area and yield, as well as the monthly supply and demand balance sheet Compared with the adjustment in March, the adjustment in March was more positive. Among them, the global planting area was reduced from 484.05 million acres to 483 million acres, and the yield dropped slightly from 51.3 kg/acre to 51.1 kg/acre. Affected by adjustments in area and yield, the U.S. production in 2020/2021 was again reduced by 55,000 tons to 3.201 million tons, Brazilian production was reduced by 109,000 tons to 2.504 million tons, and the total international production was reduced by 180,000 tons to 24.672 million tons. As the consumption of Pakistan, Bangladesh, and Turkey has been increased by 20,000 to 40,000 tons, the total consumption has been increased by 55,000 tons to 25.574 million tons. The gap between international supply and demand expanded from 667,000 tons in the previous period to 902,000 tons. As a result, the ending inventory decreased by 249,000 tons, and the international inventory-to-consumption ratio dropped from 81.68% to 80.53%. Regardless of the quality of the adjustment – reduced output and increased consumption, or the extent of the adjustment – the 249,000 tons of inventory reduction at the end of the period was nearly twice the 127,000 tons reported in February, this report should be considered comprehensively bullish. If there is anything negative, the U.S. cotton inventory-to-consumption ratio has been slightly adjusted from 24.02% in the previous period to 24.15%. This may be interpreted by the cotton futures market as the future adjustment of U.S. cotton has moved from positive to neutral or even negative. . However, the contrast between the rapid rise in the cotton market after the February report and the daily limit-down of many cotton futures contracts after this report is really shocking! After this correction, cotton planting income has declined again compared to other crops such as soybeans and corn. If there is no subsequent price adjustment, it is expected that the cotton planting area in the next year will be further reduced in the supply and demand balance sheet in April.
The start-up load increased, and the sharp decline in short fiber suppressed the trend of cotton
Short fiber futures were listed on October 12, 2020, and since then the price trend has been consistent with Cotton prices are highly correlated. The periodic price highs of the main short fiber 2105 contract appeared on October 20, 2020, January 8, 2021, January 28, 2021, and February 25, 2021 respectively. The periodic highs of the cotton 2105 contract will appear on October 19, 2020, January 7, 2021, January 29, 2021, and February 25, 2021. The periodic lows of the two appeared at basically the same time, and the price difference related to the 2105 contract has remained at 7900-8900 yuan/ton. The fundamental reason is that the price trend during this period was mainly driven by macro expectations and strong consumption. The two driving factors are consistent and the trends are naturally similar.
The difference from cotton is that short fiber is a chemical fiber, and its supply adjustment sensitivity is higher. After a sharp rise in the early stage, the operating load of various types of polyester equipment has increased, and supply pressure is expected to be alleviated. On March 10, the short fiber raw material PTA was close to the limit, and another raw material ethylene glycol also fell by 6%. For cotton, price suppression from substitute staple fibers cannot be ignored. However, given that cotton has entered the planting period in April and the polyester end will still have production capacity released, the trends of the two may diverge. On March 10, when the cotton 2105 contract plummeted, the price difference with short fiber prices once reached the upper edge of the range of 7,900 yuan/ton, providing a good entry opportunity for long cotton and short short fiber arbitrage.
Excessive expectations are prone to discrepancies, and chain transmission will still take time
Preliminary expectations for a rebound in consumption and inflation were very full, and commodity prices were generally high. rise. This can easily lead to two adverse reactions: first, in order to control prices and reduce inflation, the government may modify and adjust economic stimulus and monetary measures, such as tightening monetary policy; second, consumption will pick up slowly and will not match the magnitude and speed of price increases. Matching, the price that rises suddenly falls back to match the actual situation after a period of time, reducing the expected difference. In addition, when the industrial chain is long, a sudden surge in a certain link will take time for the entire industry chain, especially the consumer terminals, to accept it. After the Spring Festival in 2021, yarn prices began to rise due to rising raw material costs and extremely low inventory in the early stage. The three major yarn price indexes CY Index OEC10S, C32S and JC40S fell in less than half a month from February 18 to early March. , the increase ranges from 1,000 to 1,700 yuan/ton. However, the increase in cotton and yarn prices has been temporarily shared by downstream traders, fabrics, printing and dyeing and other links, and the increase in clothing is not significant. According to data from the National Bureau of Statistics, in February 2021, the national consumer price dropped by 0.2% year-on-year and increased by 0.6% month-on-month, and clothing prices fell by 0.5%. It may still take some time for the price increases in the mid- and upper reaches to be transmitted to clothing.
This decline is mainly due to the increase in the supply of alternative short fiber, slight adjustments to some macroeconomic policies, and the return of the difference from realistic expectations after the early increase was too high and too fast. In addition, market sentiment fluctuates greatly, and the excessive excitement in the early stage suddenly develops in another direction, causing price fluctuations to rise sharply. Although the decline of Zheng Cotton on Wednesday was indeed a bit unexpected by the industry, if you refer to the trends of other bulk commodities such as chemicals, black, and non-ferrous metals, such increases and decreases can even be said to be very moderate. The recovery of textile consumption is an objective fact. Domestic yarn and gray fabric inventories are also at an absolute low in history. The upward shift in the price focus of Zheng Cotton in the early stage is by no means a tree without roots or water without a source. Waiting for macro and bulkThe overall product has stabilized, backed by the 15,000-15,500 yuan/ton range, Zheng cotton still has buying value in the medium and long term. </p
