During the domestic Spring Festival, the U.S. market continued to rise, and the main May contract once exceeded the 90.00 cent line during the session. Although domestic Zheng cotton had a good start on the first day of trading yesterday, its overall growth was not as good as that of foreign cotton. Therefore, the price difference between domestic and foreign cotton narrowed again to about 700 yuan/ton compared with before the holiday. According to the formula for calculating the price difference between domestic and foreign cotton reserves, the current price difference between domestic and foreign cotton has dropped from 2,000 yuan/ton in early December to 881 yuan/ton. The market is generally concerned about whether the rotation work is expected to start today.
According to Article 11 of Chapter 2 of the “2020 Xinjiang Cotton Rotation Implementation Rules” It is stipulated that during the rotation period, when the domestic cotton price is higher than the international cotton price (based on 1% tariff) by 800 yuan/ton for three consecutive working days, the rotation transaction will be suspended from the 4th working day; when the domestic cotton price is higher than the international cotton price, When the cotton price spread falls back to within 800 yuan/ton, rotation trading will be restarted on the first working day after the fall.
Then we will simply calculate the price difference based on the reserve cotton price difference calculation formula and with reference to the current operation and location of the domestic and foreign cotton markets. From the perspective of external market operation, because the decrease in cotton planting area in the new year given by the USDA Agricultural Outlook Forum last night, Beijing time, was less than market expectations, the intraday increase in the US market narrowed significantly, and the increase in international spot prices is also expected to slow down significantly. Based on the current operation of the New York futures contract, we temporarily calculate the spot price at 95.50 cents/pound, which translates into a RMB price of around 15,030 yuan/ton. Domestic Zheng cotton prices have reached around 16,000 yuan/ton, attracting hedging orders and the gains are under pressure. Domestic spot prices are expected to be stable and slightly higher. Overall, it is expected that the price difference between domestic and foreign cotton may be basically the same as the previous day, and it is difficult to trigger the start of the rotation for the time being.
The U.S. market is supported by fundamental factors such as tight supply and demand for U.S. cotton this year, grain and cotton price ratios squeezing cotton planting intentions, and adverse weather forecasts. It is also driven by rising external markets. In the near future, it may Will maintain a strong trend of shock. Domestic cotton prices have been boosted by positive factors such as external market pull, continued good demand and a significant improvement in the epidemic situation. Although influencing factors such as hedging pressure and Xinjiang cotton sanctions still exist, the focus of transactions has also continued to rise. Overall, the external market may maintain a strong operating trend in the short term. With the current price difference at a “critical point”, it is necessary to pay close attention and be prepared for the start of the day. </p
