Since the beginning of the month, Zheng cotton futures prices have continued to rise. On Tuesday, the CF2009 contract once reached a high of 12,155 yuan/ton, and then began to slowly pull back. Faced with this correction, market participants behaved relatively calmly. The reason may be due to changes in market driving factors or the performance of industry expectations for the market.
Initially, U.S. cotton rose strongly due to China’s continued signing of contracts. Subsequently, due to weather concerns in Texas and strong non-agricultural data in the United States, foreign cotton continued to strengthen, while the news of locust disasters in India and Pakistan once again “added fuel to the fire” for rising cotton prices. The continued strength of U.S. cotton has driven up the price of Zheng cotton, and at the same time boosted enthusiasm for domestic spot trading. From a fundamental perspective, domestic cotton social inventories are high, while demand has declined year-on-year, causing the inventory-to-consumption ratio to further rise to historical highs. Although the product sales of some textile companies have improved after the domestic epidemic has eased, there is still a lack of orders from some companies and it is difficult to sell gauze. Therefore, under the negative fundamental situation, Zheng cotton continues to rebound, which is mostly due to investors’ overdraft of positive factors. In addition, during the period when Zheng cotton was strong, some companies made timely purchases at high prices, registered some spot goods as futures warehouse receipts, and designed selling hedging plans, which also reflected their bearish mentality on the market outlook. Therefore, this correction has become inevitable in the eyes of most industry players.
On the 11th, the United States Department of Agriculture (USDA) monthly supply and demand data report was released. The global end-of-year cotton inventory estimate for 2020/21 has been raised to 104.67 million bales, compared with the May estimate of 99.43 million bales. The global end-of-year cotton inventory estimate for 2019/20 has been adjusted to 100.56 million bales, compared with the May estimate of 97.16 million bales. The U.S. Department of Agriculture also estimates global cotton consumption at 114.41 million bales, lower than the 116.46 million bales expected in May. The report data is negative for the market and will take effect immediately on the outside. ICE July cotton futures contract closed down or 0.81% yesterday, closing at 60.02 cents/pound; the intraday trading range was 59.35-60.51 cents/pound, the former being the lowest level since June 1. After digesting the early positive stimulus, Zheng Cotton took over the weakening external market and the suppression of domestic demand, and fell back to around 11,850 yuan/ton.
According to the survey, most market participants believe that Zheng Cotton’s correction this time is limited, and the bottom support is moving upward. At present, it is only a reflection of returning to fundamentals. In the later period, domestic and foreign economic recovery is an inevitable trend, and prices Strengthening will also become the main theme. Therefore, the market performance will be relatively calm during the new round of correction. </p
