In 2021, the market has many expectations for the commodity market. Driven by the outbreak of the global epidemic, the past year has been a year of great investment opportunities. The low point near 10,000 yuan/ton rose to 15,500 yuan/ton, an increase of more than 50%. Of course, what supports such drastic fluctuations in cotton prices is the inherent supply and demand logic of the commodity. Changes in the supply and demand logic have directed this drama.
Cotton prices fell sharply due to the outbreak
In the first quarter of 2020, the domestic epidemic suddenly broke out. Different prevention and control measures were adopted in various places, and most companies were restricted from starting operations. , cotton demand is about to reach freezing point. The market sentiment has become more and more pessimistic, and it has also given institutions a good opportunity to short-sell until the cotton price falls below the 10,000 yuan mark. In history, the price of Zheng cotton has only fallen below 10,000 yuan twice, in 2016 and 2020. Even with the outbreak of the global financial crisis in 2008, it still managed to hold on to 10,080 yuan/ton.
The reason why Zheng Cotton experienced an epic decline was because demand almost stagnated due to the epidemic. Under the extremely pessimistic mood, cotton prices finally stopped falling. This is the truth that things must reverse when they go to extremes. Of course, from another perspective, the operation of “catching a flying knife” when falling is also an extremely risky operation. There is a saying that goes well, “Opportunities for long positions will come out when they fall, and opportunities for short positions will come out when they rise.” As the effectiveness of domestic control continues to improve, stagnant consumption gradually recovers, and funds finally respond, cotton prices have since begun a meteoric rise.
In this general trend, there will be countercurrents in the middle, and there will be many countercurrents, resulting in the K-line fluctuation pattern. Looking back on the market situation at that time, many investors insisted that it was difficult for cotton prices to rise sharply because of the pressure on cotton prices caused by Sino-US economic and trade relations and restrictions on cotton in Xinjiang. However, the reality is that cotton prices have been rising steadily. In fact, what really affects cotton prices is the change in the logic of supply and demand. Market sentiment can only determine the moment and cannot change the trend.
Cotton prices began to counterattack due to multiple factors
The rise in commodities is inseparable from the release of water from global central banks. In order to bail out, governments of various countries can only resort to large quantities of The consequences of printing money and putting it on the market will of course be inflation. This behavior is really helpless, otherwise the consequences will only be more serious. Faced with the situation of “releasing water” by global central banks, short sellers can only be wiped out. From a micro perspective, the logic of cotton supply and demand has also changed compared to the first quarter of last year, because with the accelerated spread of the global epidemic, China was the first to control it, prompting us to become a global factory. Since the third quarter of last year, our country’s industrial and consumer products have faced strong import and export.
This change in supply and demand logic was not expected in the early stage. Under the conditions of the global epidemic, it is not how much consumption has increased, but global orders have turned to our country. Because the epidemic is best controlled and the products are the safest, they are favored. Customs data is the best evidence. From January to November 2020, my country’s cumulative export volume of textiles and clothing was US$265.2183 billion, a year-on-year increase of 9.91%, of which the cumulative export volume of textiles was US$141.6514 billion, a year-on-year increase of 31.01%.
No one can answer accurately how long this situation will last, because it is not known whether the epidemic will recur. There are already mutations. The effectiveness of the vaccine against mutated viruses requires further research and testing. I believe there will be clear results soon.
As the global epidemic improves, the supply and demand pattern is expected to change
Of course, judging from expert predictions, it is expected that the global epidemic will be controlled and improved in the first half of 2021. On the contrary, we need to be vigilant about this, because the improvement of the global epidemic situation is likely to cause an adverse situation for some domestic commodities, including cotton. Currently, countries around the world are actively injecting vaccines. Once the global epidemic is under control, the doors that were originally closed by various countries will be opened one after another, increasing the pressure on domestic epidemic prevention and control, and the virus transmission rate may increase significantly, so the epidemic prevention and control situation will become more severe. .
In addition, from the perspective of cotton, the global epidemic situation is gradually improving, and global consumption will also usher in a retaliatory rebound like the domestic one in the early stage. The power of the demand that has been suppressed for a year cannot be underestimated. . Unfortunately, in this global consumption feast, the profits shared by Chinese companies may be very limited. Because after the epidemic is controlled, global textile and clothing orders will shift in large quantities to our main competitors India, Pakistan and Southeast Asia. According to the latest news, Pakistan’s textile and apparel production is booming, and export demand has entered the best period after the epidemic. Brands and retailers have begun to shift their procurement sources to Pakistan, and the production of knitted garments and ready-made garments for export has reached full capacity. At the same time, some Chinese orders have begun to flow to India, and India’s floral yarn exports are also very strong.
At present, Zheng cotton futures are approaching 15,500 yuan/ton. The pressure at this point must be very high. Once it breaks through, it will continue to rise towards the next high point. If the vaccine is effective and the global economy recovers strongly, foreign cotton prices will definitely follow a dazzling curve. Since the epidemic, with consumption shrinking, the support of foreign cotton prices has always been stronger than domestic cotton prices, mainly because my country’s large-scale purchases have played an important role. Once the demand for foreign cotton increases significantly, the relatively tight domestic supply situation will become more prominent. Driven by the sharp increase in foreign cotton prices, domestic cotton prices will inevitably rise. Although “black swan events” will still occur, from the news�Analyzing the background of recovery, Zheng cotton is expected to continue to rise in the first half of 2021, and is likely to replicate the resonance of domestic and foreign cotton prices rising in 2020.
The above is the author’s prediction. If it is right, it is entirely accidental. If it is wrong, readers will laugh it off. The top position of cotton has not yet shown any clues, and there are still certain investment opportunities, but opportunities like 2020 are gone forever. </p