Recently, the heads of state of China and the United States successfully met in Bali, Indonesia, and the market has increased confidence in the economic and trade development of both parties. In addition, the U.S. CPI and PPI slowed down more than expected in October, which weakened the market’s concerns about inflation. As the Fed’s expectations for interest rate hikes slowed down, the positive effects of macroeconomics gradually emerged, and futures prices rose in resonance in both domestic and external markets. This year, affected by the epidemic, geopolitical conflicts, and increased economic pressure in many countries, domestic and foreign textile consumption has been affected to varying degrees, and there are still no signs of improvement. Spot cotton purchases and sales have encountered greater resistance.
Whether it is industry expectations that the Fed will raise interest rates in December or that the Sino-US meeting will boost confidence in the development of the world’s two largest economies, the current pessimistic atmosphere in the macro market seems to be declining. In addition, according to the latest fund position report released by the CFTC, as of November 8, the ICE cotton futures market had a net long position of 13,712 non-commercial futures plus options, an increase of 6,378 contracts from the previous week, and a net long position of non-commercial futures positions of 20,477. Zhang, an increase of 4,325 contracts, and commodity index funds were net long 68,853 contracts, an increase of 4,731 contracts. Fund net long positions have increased, and ICE’s bullish atmosphere has increased. Zheng Mian is also due to the small number of registered warehouse receipts and the increased delivery pressure of the main CF2301. The capital bulls are eager to catch up, and both domestic and foreign futures have strong fluctuations.
In late November, most of the new cotton has been harvested across the country. Currently, only some areas of southern Xinjiang still have a certain amount of seed cotton that has not yet been harvested. Although the progress of lint processing and public inspection this year has been slow, more than 2 million tons of lint have been processed domestically. The supply increased significantly in a short period of time, and ginning companies were active in shipping. Some pre-sale “blind boxes” were competitively shipped at low prices, resulting in a steady decline in spot prices.
As Zheng cotton rises and spot prices fall, the price difference between futures and spot prices is shrinking. Recently, Xinjiang cotton enterprises have reported that while the main price of Zheng cotton has increased from 12,700 yuan/ton to 13,500 yuan/ton, the price of Xinjiang cotton has dropped from 14,000 yuan/ton to 13,600 yuan/ton. On the other hand, as the price of seed cotton rises, the cost of lint cotton increases accordingly. The cost situation of futures premium lint cotton is changing, the advantage of selling hedging is declining, and the pressure of centralized hedging of new cotton may be difficult to achieve. Therefore, futures may continue to float upward in the short term, while spot prices may continue to decline given the concentrated supply situation. Futures spot prices may continue to move closer.
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