Since the geopolitical conflict between Russia and Ukraine, international crude oil has continued to rise. U.S. and Brent crude oil futures continued to maintain a strong upward momentum after opening today. Brent crude oil consolidated again to reach a new high since 2008. As the mother of commodities, the price of crude oil has rocketed upward, stimulating the rise in prices of related commodities while also bringing more risks to the market. ICE US cotton futures fell sharply on the external market last Friday, with the main May cotton contract closing down 3.38 cents/lb, with a settlement quote of 116.42 cents/lb. Today, driven by the rise in crude oil, the market opened straight up and maintained a strong consolidation. Futures prices rise and fall from time to time, adding many difficulties to spot trading in the textile industry.
According to some cotton production companies and trading companies, the most fundamental factor why cotton prices have remained above 20,000 yuan this year is that the price of seed cotton increased in the early stage, which led to a sharp increase in lint prices and costs. However, the entire downstream industry has not fully digested it so far. From the increase in upstream production costs. At the same time, under the contradictory situation of high costs and weak demand, the product profits of downstream companies have been swallowed up, market contradictions are acute, and problems such as the fragile industrial structure have become increasingly obvious. In particular, the amplitude of futures prices at home and abroad has increased recently, it is difficult to control the cost accounting of raw materials for textile companies’ orders, and it is difficult for supply-side ginning companies to adapt to market changes at fixed prices. Investors are also worried about the impact of crude oil peaking and falling.
Amid the outcries, the oils and fats market stands out, with soybean oil and palm oil approaching their daily limit several times, and the cotton oil market showing a strong bullish atmosphere. According to feedback from some cotton oil manufacturers, although the price of cotton oil has been rising since the Spring Festival, due to the high price of cotton seeds this year, most oil plants do not dare to easily reserve raw materials. Therefore, part of cotton oil profits are also eaten up by cottonseed costs. Furthermore, the performance of oil and fat consumption after the holidays is mediocre, and the profit margin that can be realized is very limited. Therefore, it is too early to speculate on the general rise in commodities based on the rise in international crude oil and to conclude that profits can be made with “certainty”.
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