In the past week, the oscillation range of Zheng Cotton’s main CF2105 contract has continued to move down from 15,500-16,000 yuan/ton to 15,000-15,500 yuan/ton. Not only the quotations and shipment enthusiasm of cotton processing companies have declined, but also cotton textile mills and intermediate companies have declined. The sentiment of traders chasing shorts and selling down is relatively strong. Judging from market feedback, cotton traders’ order resources have increased significantly compared with the previous period, and they are more enthusiastic about moving warehouses to cotton consumption areas in the mainland. Traders’ arbitrage operations have “trampled” the spot market price. Processing enterprises are hesitant to decide whether to follow or not to follow the quotation. If they follow the price reduction, the basic profit of lint cotton will decrease or even make a loss; if they do not follow the price reduction, sales will basically stagnate and cash flow pressure will increase.
What factors are currently restricting Zheng Mian from bottoming out? The author briefly summarizes the following points: First, since February 18, the central bank has carried out 7-day reverse repurchase operations every working day, and expectations for tightening of monetary policy have increased. Recently, the central banks of Turkey, Russia, Brazil and other countries have taken interest rate hike measures to deal with imported inflation and stabilize their own exchange rates. The Central Bank of China is also facing the test of large inflation caused by the Federal Reserve’s “big release of water”;
Second, although the results of the high-level meeting between China and the United States are expected, China and the United States are very different and the two sides have not reached any agreement. The market’s concerns about the direction of China and the United States are difficult to dissipate in the short term;
Third, the digestion problems transmitted from terminals such as clothing, fabrics, gray fabrics, and cotton yarns gradually put pressure on Zheng cotton and spot goods. The pullback trend of gauze and other products continues, and Zheng cotton’s rebound is full of difficulties;
Fourth, domestic cotton supply is sufficient in 2020/21, and the correlation with external markets and foreign cotton has declined. Xinjiang’s cotton output in 2020/21 has reached a new high (as of March 21, Xinjiang’s cotton has accumulated 5.646 million tons of public inspections this year, and the total annual output is estimated to exceed 5.7 million tons). According to a survey by the China Cotton Association, as of the end of February, the national cotton planting intention fell by 0.59% year-on-year, but the area of cotton planting intention in Xinjiang was 37.2023 million acres, a year-on-year increase of 1.49%. Therefore, it is expected that the cotton planting area and yield in Xinjiang cotton areas will continue to increase year-on-year in 2021. </p
