The recent turmoil in Russia and Ukraine has intensified the rise in crude oil, resulting in a strong bullish atmosphere in the commodity market recently. The current international crude oil price has exceeded 110 US dollars/barrel, while Zheng cotton continues to fluctuate around 21,000 yuan/ton.
There is no doubt that the current market risk coefficient is extremely high and there is great uncertainty. March is the time when the Federal Reserve is expected to raise interest rates, and the current situation between Russia and Ukraine is tense. The two countries are fighting and talking to promote talks. Once the interest rate hike and the results of the talks resonate, crude oil prices are bound to fall sharply, and cotton prices will naturally also There will be a sharp downward adjustment.
This round of cotton prices followed the rise of crude oil to around 21,500 yuan/ton and then turned downward, indicating that there is greater pressure to continue upwards and bulls are not willing to continue to increase. As of March 2, the number of registered warehouse receipts for Zheng cotton was 18,348, equivalent to more than 730,000 tons of lint cotton production. Xinjiang cotton production is calculated based on 5.2 million tons. The number of registered warehouse receipts now accounts for a small proportion of Xinjiang cotton production, so it continues to increase A rise in the market will rapidly increase the volume of warehouse receipts and increase the pressure on firm orders, which is not what bulls want to see unless there is really good news in the market. Therefore, it is not logical for speculative funds to continue to go long at high levels. It is not a textile company and will not accept warehouse receipts.
In addition, the rise in cotton prices to high levels has given many upstream companies hedging opportunities. In the context of huge cotton price risks, these companies will be risk-free no matter whether cotton prices rise or fall in the future. In the cotton market, upstream ginning companies and traders are short sellers in the natural industry and are also the largest short sellers in this market. Market funds will obviously not easily put their opponents in the most advantageous position. Soldiers who, deception also. Use profit to lure them, use chaos to take them, be practical and prepare them, and use force to avoid them.
Of course, the author believes that the short-term cotton price does not have the basis for a deep fall. Although the spot price of cotton is now somewhat loose, the absolute price is still high, and the futures price is obviously at a premium. In recent years, with the popularity of basis trading and the strong hedging power of Zheng Cotton, many speculative funds have suffered large losses from long or short positions. Under such conditions, excessive bearishness in the downward direction is bound to be extremely risky. The spot price in the market is strong, and there is still more than a month until the May cotton contract delivery time. It will be difficult for short sellers to deliver low-priced goods by then, so short sellers are wary. The current market low should be around 20,000 yuan/ton. If it is close to or lower than this price, downstream textile companies can boldly purchase, because what they buy themselves is the cheapest cotton currently on the market. Currently, port traders’ customs clearance quotations show that Brazilian cotton is 100-200 yuan/ton higher than Xinjiang cotton in inland warehouses, and US cotton is 500-700 yuan/ton higher than Xinjiang cotton.
In short, the current cotton market maintains a wide range of fluctuations, and cotton-related companies can find a buying and selling rhythm that suits them at 20,000-22,500 yuan/ton.
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