Last week (July 26-30), the cotton textile market was hot, and cotton and cotton yarn futures rose sharply. The Zheng cotton CF2109 contract once hit a high of 17,835 yuan/ton; the Zheng cotton yarn CY2109 contract soared during the session, reaching 27,520 Yuan / ton. Most insiders said that cotton and cotton yarn have surged simultaneously, and that the growth rate of cotton yarn is stronger than that of cotton, which is rare in the market in recent years. Although there was a correction in Zheng cotton and Zheng yarn last Friday (30th), the upward trend of cotton and cotton yarn has not changed.
Intuitively speaking, this round of price increases began in late June. At first, cotton prices continued to rise. Downstream textile companies were forced to increase processing costs, and gauze profits declined, which subsequently increased. Selling cotton yarn at a higher price to balance profits. At present, it is normal for yarn mills to have low inventories of cotton yarn products. In order to ensure the supply of downstream goods, some yarn middlemen, stimulated by the psychological effect of buying up rather than buying down, accelerate the purchase of yarn, resulting in a rapid shortage of yarn. The increase will further promote the bullish enthusiasm of the cotton yarn market, prompting long funds to follow suit (the possibility of a squeeze is not considered here for the time being). The rapid rise in cotton yarn prices has once again stimulated the enthusiasm of upstream cotton to catch up. In addition, the market generally believes that a rush for cotton harvest in the new year is a foregone conclusion, and there is strong support for the rise in cotton prices.
According to the July forecast report of the United States Department of Agriculture, China’s cotton consumption this year may recover to 8.7 million tons. Some institutions predict 8.5 million tons. This data has reached a normal year. level. Therefore, under the premise of recovery of basic consumption, the cotton supply side is strongly expected to reduce production. In addition, Xinjiang’s ginning production capacity is increasing, and the direct impact of rushing to harvest cotton is to push up the cost of new cotton. Therefore, there is still room to realize the bullish market sentiment.
In the short term, mutated strains of the new coronavirus at home and abroad have brought certain risks to the market. All parties in the market have become more cautious, and prices of flowers and yarn have adjusted to some extent. However, it is expected that the epidemic will have a negative impact on the entire textile industry. The impact is still relatively limited. On the one hand, most people in the country have been vaccinated and the immune barrier is gradually improving; on the other hand, various regions have summed up certain experiences in early response to the epidemic, and their prevention and control capabilities have been greatly improved. Furthermore, the supply and demand situation at home and abroad is improving, and the pressure for cotton prices to rebound has decreased. Therefore, being overly pessimistic about this correction may lead to new misunderstandings. </p
