This week, the Federal Reserve unexpectedly cut interest rates, central banks around the world started a wave of interest rate cuts in response to the epidemic crisis, and domestic epidemic prevention and control achieved remarkable results. Zheng cotton futures picked up ahead of schedule, but spot prices continued to weaken.
1. Zheng cotton futures rebounded from lows while domestic spot prices declined weakly
This week, the Federal Reserve unexpectedly announced a 0.5% cut in the federal benchmark interest rate, a record high since the financial crisis. The maximum interest rate cut, the ten-year U.S. bond yield reached a new low, and the global financial market showed deep concern about the impact of the epidemic. ICE cotton futures maintained a narrow sideways trading, waiting for a breakthrough in the direction. Zheng cotton futures continued to rebound this week, but domestic spot prices are still declining with inertia, and the basis difference is shrinking rapidly. The settlement price of the main cotton futures contract in Zhengzhou was 12,665 yuan/ton, up 405 yuan/ton or 3.3% from the previous week; the average price of the national cotton price B index, which represents the market price of standard grade lint cotton in the mainland, was 12,804 yuan/ton, down 478 yuan/ton from the previous week. Yuan/ton, a decrease of 3.6%. The settlement price of the main New York cotton futures contract was 62.79 cents/pound, an increase of 1.30 cents/pound or 2.1% from the previous week; the average price of the International Cotton Index (M), which represents the average CIF price of imported cotton in China’s main port, was 72.04 cents/pound. pounds, a decrease of 2.76 cents/pound, or 3.7%, from the previous week, and the price difference narrowed by 222 yuan/ton from the previous week.
This week, after the central reserve cotton was suspended for two consecutive trading days, it was restarted on March 4, and the listing volume increased to 15,000 tons to support the resumption of operations of cotton-related companies. The maximum price limit for reserve cotton bidding this week is 13,565 yuan/ton. After the resumption of listing, cotton enterprises are more active in trading and storage.
According to calculations by the National Cotton Market Monitoring System, as of March 6, a total of 5.778 million tons of seed cotton and lint cotton had been sold across the country, a year-on-year decrease of 181,000 tons; a total of 5.724 million tons of lint cotton had been processed, a year-on-year decrease of 113,000 tons. , the processing rate is 99.1%; the cumulative sales of lint cotton nationwide are 2.932 million tons, an increase of 92,000 tons year-on-year, and the sales rate is 51.2%.
2. Imported cotton shipments have declined and downstream demand is still sluggish
According to some traders, the recent arrival and delivery volume of foreign cotton shipments The impact of the global epidemic outbreak on shipping and road transportation has become more prominent. Textile factories will have limited new orders after the year and are not willing to purchase raw materials. The price of conventional outer yarn is 21 yuan/ton higher than that of domestic yarn; the price of polyester staple fiber fell by 90 yuan/ton to 6,426 yuan/ton.
3. Policy support for logistics recovery The central banks of various countries have successively cut interest rates
This week, The Standing Committee of the Political Bureau of the CPC Central Committee held a meeting to study the key tasks of epidemic prevention and control and stabilizing economic and social operations; the National Standing Committee determined measures to support the relief and accelerated recovery of the transportation and logistics industry. The central bank emphasized improving the macro-prudential assessment system and unleashing the potential of the reform of the loan interest rate market-based quotation mechanism (LPR). After the Federal Reserve unexpectedly cut interest rates, central banks around the world launched a wave of interest rate cuts with “full firepower” to deal with the negative impact of the spread of the epidemic. At present, the growth rate of new domestic cases has slowed down significantly, while new cases abroad have increased significantly, and the focus of the epidemic has shifted from domestic to foreign countries. Under the epidemic prevention and control principle of preventing domestic spread and external import, the domestic economy is recovering steadily.
4. Market outlook
The USDA report shows that the net contract volume of U.S. upland cotton increased significantly from February 21 to 27 compared with the previous week. China Purchasing continues to increase. Affected by logistics stagnation, delayed resumption of work and exchange rates, foreign cotton inventories at domestic ports remain high and price pressure is high. The domestic epidemic prevention and control has achieved remarkable results in stages, the confidence of the domestic textile industry has recovered, the startup rate of textile enterprises continues to increase, and the cotton futures market has recovered. It is expected that the short-term downward space of domestic cotton spot is relatively limited. In addition, due to poor terminal orders, the continued upward resistance of cotton yarn prices has increased, and the mid-term market trend will still be determined by the recovery of demand.
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