The current cotton market participants actually already have multiple balance sheets in their minds, and the participants know that they cannot use the static data of any balance sheet to reflect the dynamic facts. There are too many variables faced this year, and the elasticity of various variables is also large, so it is biased from any perspective.
As the new year approaches, the market is facing multi-dimensional considerations. From the perspective of supply, cotton-using enterprises measure it from the perspective of demand, traders measure it from the perspective of basis difference and market trends, speculators measure it from the perspective of valuation, commodity price comparison and currency supply, while the government measures it from the perspective of trade balance and protecting the interests of all parties in the market. Introduce relatively win-win policies. The author combines the views of all parties to weigh the supply and demand situation and outlook for the new year.
I will not analyze the annual balance sheet more before analyzing. Everyone has their own accounts, but overall there should be no huge imbalance between supply and demand. Supply is slightly greater than demand, which is the mainstream. Inventory consumption ratio It is also in a mid-to-high position overall.
Let’s first analyze the three market regulars, ginners, traders and textile mills, which are also the most basic variables. For cotton, the final recipient is the textile factory, which is also the investor. Everyone knows the financial situation of textile companies this year. The export and domestic sales of textiles are not very good. Textile companies are struggling on the edge of survival. Moreover, the new crown epidemic and China-U.S. The impact of the trade war continues. Therefore, the probability of large-scale inventory and purchase by textile companies is not high, mainly because of the tight funds in their pockets.
Looking at traders, compared to textile companies, they have relatively strong financial strength. This year, they mostly purchase and sell based on basis, so this year’s basis should reach an actuarial level. To a certain extent, the control of capital interest, warehousing, transportation and other expenses must be very precise, otherwise it will be difficult to gain a foothold in the market. The number of traders doing unilateral trade is very small and does not constitute a market entity. From this perspective, the volatility of the cotton market may be reduced.
For cotton ginning mills, most of the market entities this year focus on earning reasonable processing profits. During the concentrated listing period of cotton, the main focus is to increase the utilization rate of funds, and it is rare to start betting on the market in the early stage. Therefore, it is difficult to form a situation of reluctant to sell and gamble on the market.
With the mentality of speculators, there is a lot of data analyzing M2 this year. Basically, it can be summed up as “four taels of soil are taken into the mouth a day, and there is not enough to replenish it during the day and night.” Many countries around the world are “based on How much GDP falls will basically depend on how much M2 will make up for it.” And these currencies are mostly supported by the national credit system. If the currency cannot hold up, it will trigger inflation. Therefore, the current differences in the market are “the intensity of rescue vs. the intensity of recession” and ” Increase the intensity of inflation VS the intensity of price decline caused by falling commodity demand.” Judging from the current market performance, the long side is slightly better, especially in the non-ferrous and black fields. In the field of agricultural products, oils and fats have the most outstanding performance, and cotton belongs to the Students with poor performance.
The U.S. sanctions list ranges from China’s large and medium-sized textile companies to restrictions on Xinjiang cotton, which will trigger the adjustment of the cotton industry’s cotton structure and cause local supply and demand imbalances. The current overall performance is that the United States suppresses domestic textile and apparel exports, and the country has also started internal circulation and other methods to improve the situation, but it will take time to resolve this imbalance. The U.S. election will take place in the next two months, and it is still unknown how U.S. policy will change.
To sum up, from the perspective of traditional market participants, the cotton market is an extremely stable and narrowly fluctuating variety at the beginning of the new year, and more variables come from funds and The game of policy is a market that is difficult for us to analyze and grasp. What policy directly changes is supply and demand, and although funds change relatively slowly, they directly change the pricing basis and model, especially in such a volatile year. The above analysis cannot provide you with too many insights into market trends. I only hope that all market participants can make good trading strategies, analyze their own risk tolerance, do the trading methods that you are familiar with, and keep your own stability to deal with the many external factors. Change may be a wise move. </p
