In late February, the COVID-19 epidemic was gradually being brought under control. Due to concerns about the progress of companies’ resumption of work, market panic has not been completely eliminated. Judging from the survey, the impact of the epidemic on the upstream supply side of cotton is far less than the downstream consumer side.
According to professionals in Xinjiang, all ginning companies have completed processing before the Spring Festival. Some manufacturers with large purchases still have some seed cotton to be processed. The impact of the epidemic on cotton processing and production is limited. In terms of sales, most cotton ginning companies have used hedging to sell at point prices in 2019. As cotton prices fell, spot losses occurred, but futures were profitable. Even if it is sold at the current spot price, it will still be profitable, not to mention that the current spot resources in the hands of ginning companies are limited, and they are mainly concentrated in trading companies. For trading companies, the impact of falling cotton prices is also limited. The current Zheng Cotton CF2005 contract price is lower than the entry point during early hedging. Therefore, the overall impact on the upstream supply side of cotton is limited.
It is reported that although the epidemic has affected road transportation in Xinjiang, the railways out of Xinjiang are operating normally. At present, downstream cotton consumption has not improved significantly, and it has little impact on the circulation of cotton out of Xinjiang.
As for the future trend of cotton prices, some ginning companies believe that once downstream consumption resumes after the epidemic, the low cotton price is more likely to rebound. Some companies also believe that the current epidemic situation is still unclear, especially with the news of the spread of new coronavirus infections being reported in foreign countries. The market sentiment is pessimistic and it will be difficult for cotton prices to rise. </p
