On July 19, global financial markets and commodities encountered Black Monday. The “Delta” mutant strain triggered a surge in the number of confirmed cases of new coronary pneumonia around the world, causing the U.S. Dow Jones Index to plummet by thousands of points. Last Sunday, OPEC reached an agreement The agreement to increase production caused international oil prices to plummet. The above factors triggered panic selling. ICE cotton futures fell nearly 4%, and the main December contract retreated to 86-87 cents.
Similar to previous situations, the plunge in the U.S. stock market and crude oil futures this time was caused by the new coronavirus epidemic. “The market is worried that the surge in cases caused by the “Delta” mutant strain may once again trigger large-scale blockades in various countries. However, as vaccinations in Europe and the United States gradually form an immune barrier, the impact of the epidemic on the market has weakened. For crude oil futures, although OPEC has agreed to increase production, analysts believe that a single-day increase of 400,000 barrels of supply can be digested by the market and will help stabilize market expectations for future crude oil prices, which is still positive for oil prices.
As of the afternoon of the 20th, after a short-term panic decline, domestic and foreign commodities, including crude oil, have generally stabilized and rebounded. ICE cotton futures recovered half of the previous day’s decline during the session. The December contract is back at 88 cents/pound. Domestic Zheng cotton futures continued to rise after opening low, with the main force CF2109 rising to 16,685 yuan/ton, and the decline narrowed significantly. The Shanghai and Shenzhen stock markets also digested early losses, releasing panic in the financial markets.
Many people in the industry believe that the sharp drop in cotton prices is not surprising. According to the exchanges between China Cotton Network and industry insiders, it is generally believed that the early external market gains have been relatively considerable. From the technical graphics point of view, 90 cents is an important resistance price. US cotton has encountered upper track resistance and appeared with the cooperation of the external environment. Normal adjustment, the overall high and volatile trend has not changed. The surge in global COVID-19 cases and the plunge in crude oil are just the triggers for a correction in cotton prices. Even without these two things, prices have reached the point where they need to adjust. From the perspective of medium-term trends, the fundamentals of cotton supply and demand remain stable and positive.
In the past year or so, the main reason for the continued upward trend in cotton prices has been the recovery of cotton demand. There is no need to worry too much about the current recovery of cotton demand. Textile mills in various countries have been replenishing their stocks. However, there is no change in the optimistic expectations of the global supply and demand situation next year. While the rate of high-quality cotton in the United States is increasing, the serious lag in the growth progress of new cotton in the United States may lengthen the supply gap before new cotton is launched, which provides strong support for the cotton price trend in the third quarter. Since the beginning of this year, cotton prices have experienced several corrections, and after each adjustment, the market has returned to the upward channel under the strong support of demand. From 76 cents to 81 cents to 84 cents, the price bottom has continued to move upward. Although this single-day decline is large, it is still a normal fluctuation, and the long-term upward trend of cotton prices has not changed.
Despite this, the market cannot be blindly optimistic about the cotton price outlook. Industry insiders said that the global economy has not yet “recovered” from the epidemic, and mutated viruses will still interfere with the continued economic recovery from time to time. The global economy is still in the recession process before the epidemic, and is only rebounding from last year’s low point. Nowadays, it is difficult to reverse the bailout policies of various countries. The lack of stamina of economic recovery is also an unavoidable topic, and the excessive growth rate of commodities seriously deviates from fundamentals. Against this background, the temporary setbacks during the recovery of the cotton market are also in line with market rules. </p
