Recently, affected by the COVID-19 epidemic and the crude oil price war, the price of Zheng cotton has experienced a wide range of fluctuations. The CF2009 contract has risen from a low of 10,385 yuan/ton to today’s near 11,500 yuan/ton, within 14 trading days. It increased by about 1,200 yuan. At present, the pessimism in the market has stabilized, and the phenomenon of bargain hunting has gradually emerged. The price rebounded rapidly after touching 10,000 yuan/ton twice. However, the reality is still grim, and cotton prices are facing correction pressure after a short-term rise.
It is undeniable that the funds that bought the bottom in the early stage did not pay attention to the recent price trend. They were doing forward transactions. We know that mature funds do not care about the gains and losses of a city or a pool. They pay more attention to the expected future price. The author also believes that as long as the COVID-19 epidemic passes, cotton prices will definitely resume their upward trend. It is only a matter of time, unless there are greater unpredictable risks. However, this type of trading style may not be suitable for the vast majority of retail investors because of the anti-pressure mentality and positions. Necessary conditions such as management may not be met. No matter how bullish the market is, it will correct or rebound in a bearish market, so it is very important to grasp the rhythm. Even if you are not sure, it is a small comfort to at least not make yourself uncomfortable holding a position.
Recent fundamental news and data also show that cotton prices will continue to fluctuate, and market participants should wait patiently for opportunities and avoid getting into trouble.
On April 12, OPEC and its oil production allies reached a historic agreement to cut crude oil production by 9.7 million barrels per day, the largest production cut in history. Faced with this good news, the market reaction was relatively muted, with U.S. crude oil futures returning to around $24/barrel. Although it is lower than market expectations, it at least shows that when oil prices fall below 20 US dollars per barrel, oil-producing countries will not be able to bear the pain.
Although crude oil has temporarily stabilized, it has limited support for cotton prices. At present, countries around the world have adopted city closure measures, and the lockdown period continues to be extended, resulting in a significant reduction in orders from downstream companies. In the case of sufficient supply and weakening demand, the downward pressure on cotton prices is still great. The following data is good proof.
According to a survey by the National Cotton Market Monitoring System, as of the beginning of April, the average number of days of cotton inventory used by enterprises was approximately 50.9 days (including the quantity of cotton imported to Hong Kong), an increase of 15.7 days year-on-year. The national cotton industry inventory is estimated to be approximately 996,000 tons, a year-on-year increase of 28%.
Raw material inventory increased year-on-year, and product inventory also suffered from slow sales. At the beginning of April, the yarn production and sales rate of the sampled enterprises was 81.1%, down 0.8 percentage points from the previous month, and 24.5 percentage points from the same period last year; the inventory was 33.8 days of sales, an increase of 0.9 days from the previous month, an increase of 13.6 days from the same period last year, and an increase of 13.6 days from the same period in the past three years. High 17 days.
It can be expected that in the future, the inventory of raw materials and products of enterprises will only increase more, and the pressure on production and operation will be greater. Under such realistic conditions, the risks of rushing to chase prices will inevitably be magnified. Sometimes the price is the result of a compromise between reality and belief. In a volatile market, it may be a better choice to go with the trend. </p
