On June 23, Zheng cotton continued to plummet, falling to around 18,300 yuan/ton in less than a week, and the important early support was quickly broken. The speed and depth of Zheng Mian’s downward adjustment exceeded market expectations.
Looking back at Zheng Cotton’s smooth decline, it is inseparable from the short trend in the entire commodity market. In fact, the decline in cotton is not large, and the decline in other bulk commodities is even more severe. This round of overall commodity decline was caused by the Federal Reserve’s sharp interest rate hike, but the consequences of the interest rate hike are also gradually emerging. At a congressional hearing on June 22, Federal Reserve Chairman Powell believed that after the Federal Reserve’s historic interest rate hike, the U.S. economy was likely to decline and that it would be “very challenging” to achieve a soft landing. However, Powell also insisted that because U.S. inflation has exceeded expected levels, tightening monetary policy is an effective tool to combat inflation and that interest rate increases will continue. This undoubtedly poured cold water on the market.
This time Zheng Mian’s decline showed a collapse of the army. It was obviously seriously disturbed and affected by market sentiment. Otherwise, the large decline would not have run so smoothly. I am afraid only the market can give the answer when the decline can be stopped. . Faced with such a plunge, how has the entire cotton spinning industry chain been affected? It is reported that upstream cotton ginning companies that have not hedged have stopped sales, and the game between all parties in the industry has entered an anxious stage. Last year, due to the high-priced purchase and processing of lint cotton, companies either failed to hedge in time, or the hedging ratio was low. As a result, cotton companies encountered tremendous pressure when cotton prices plummeted. In order to avoid large losses, cotton companies are now reluctant to sell at high prices.
For textile companies, they are now in urgent need of replenishment. Although cotton prices have fallen sharply and spinning costs have been reduced, companies are encountering a shortage of orders. This situation is even more serious than in 2011. Without orders to receive, textile companies Strong resistance to Khmer prices. Therefore, it remains to be seen whether the cotton spinning industry chain can be transmitted smoothly.
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