In anticipation of the Federal Reserve’s greater efforts to raise interest rates and shrink its balance sheet, global commodities have weakened. After Zheng cotton stopped falling and stabilized on the 14th, the market fell sharply on the 15th. The main contract of CF2209 once again fell to around the 20,000 mark, 15 The big negative line on Japan failed to close up, and the cotton price in the future is really not optimistic.
It is an indisputable fact that the supply, consumption, and inventory data have not changed much, and the fundamentals are very weak. Moreover, with the US sanctioning Xinjiang cotton, the market outlook pressure will not be relieved. It is now less than four months before new cotton is launched, and the sales progress of cotton produced last year has just passed half. Such slow sales progress rarely occurs in previous years. The root cause of this problem is that cotton prices and the epidemic have inhibited downstream consumption. On the one hand, there are a large number of existing resources last year, but on the other hand, the time for new flowers to be launched is gradually shortened. It is conceivable that the pressure in the market outlook will be great. The retaliatory consumption rebound expected by the market has yet to appear, and it is unknown whether it will happen in the future because the domestic epidemic continues to recur. Even if there is a retaliatory consumption rebound, clothing and textiles are not optimistic because the stock of new flowers is too large.
With the end of the weather speculation, only the continued rise in crude oil will support cotton prices in the future. It is still difficult to determine how strong the support will be. Due to the large price difference between cotton and chemical fiber in the early stage, some companies increased the use of chemical fiber and reduced the use of cotton. There should be about one-third of such companies. If crude oil prices continue to rise and the price advantage of chemical fiber over cotton weakens, companies may be able to increase the amount of cotton used.
Of course, whether cotton prices can eventually stabilize depends on fundamentals. Relying on external inflation factors is not reliable. At present, early-sown cotton in Xinjiang has budded and bloomed, and the weather conditions in Xinjiang’s cotton areas are obviously conducive to cotton growth. This year’s cotton yield and total output are also expected to exceed last year, and the pressure on the cotton supply side continues to increase.
Although some people say that global cotton supply and demand are in a tight balance, if the U.S. and European economies fall into recession, it will inevitably have a serious impact on global commodities and cotton. As U.S. and European inflation data continue to hit new highs, the Federal Reserve and central banks are forced to step up Indicators such as the intensity of the balance sheet reduction, the continuous sharp decline in U.S. stocks and the inversion of U.S. bond yields have already reflected signs of recession in advance. The gray rhino in the financial market may be approaching, and risks will also increase.
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