Recently, Zheng Cotton’s main contract, CF2105, entered a narrow range of oscillation after briefly standing above 14,900 yuan/ton, and did not follow the trend to open the 10,000-five mark. Both bulls and shorts traded sideways and had a strong wait-and-see mood. Some institutions and cotton-related companies believe that the main contract may fall back to 14,700 yuan/ton to test the bottom support. If it does not exceed 14,700 yuan/ton, the upward trend of Zheng cotton will not change, and the market will still be easy to rise but difficult to fall. If the short position opens 14,700 yuan/ton, it means that this round of rebound has ended, the situation has undergone a phased reversal, and the market has returned to 14,000-14,700 yuan/ton, and the market has consolidated and gathered momentum.
Market concerns focus on the following three points: First, the main contract price of more than 14,800 yuan/ton can fully cover the comprehensive cost of machine-picked cotton in Xinjiang, coupled with the tightening of capital flows of some cotton processing companies and trading companies near the end of the year, it is expected that Enthusiasm for hedging will increase significantly; second, the COVID-19 epidemic continues to break out in Europe, the United States, India and other countries, and blockade measures have been fully upgraded (many countries have introduced Christmas holiday epidemic prevention plans), which has a prominent impact on global trade, economy, logistics, etc.; third, China The impact of uncertainty in US economic and trade relations on cotton.
The author judges that the Main Wanwu Pass will be a key point for short-term long and short parties to compete and stalemate. Although there are many negative factors, the probability of opening 15,000 yuan/ton is high, and the oscillation range is expected to be from 14,000-14,700 yuan/ton. It was raised to 14,700-15,500 yuan/ton. Near the end of the year, the central bank used various means to release liquidity to ensure sufficient funds. The central bank carried out a one-time MLF operation of 950 billion yuan, setting a record for the scale of a single operation. Not only did crude oil futures rise collectively, but there were also obvious signs of capital speculation in iron ore and bulk crops. The upward momentum of cotton, driven by peripheral and related commodities, still needs to be released. The growth rate of Zheng cotton warehouse receipts and effective forecasts is still lower than expected, leaving opportunities for funds to enter the market.
In addition, from a time perspective, domestic cotton textile companies and middlemen will gradually usher in a period of raw material replenishment. Coupled with the continuous improvement of domestic economic data in November and December, Zheng Cotton has sufficient confidence to make up for the increase. Finally, due to the positive effects of the current turnaround in the US fiscal stimulus plan, the start of COVID-19 vaccination in the US and globally, and the acceleration of US cotton contract exports, ICE’s mid-line will rise to 80 cents/lb. All of the above have provided strong support for Zheng Cotton to continue to rise. </p
