During the Spring Festival, the crude oil futures and bulk agricultural products markets were hot, with international oil prices soaring to a seven-year high. Coupled with strong expectations for a compensatory increase in the spot price of flower yarn before the holiday, Zheng Cotton opened strongly higher on the first day after the holiday, with the CF2205 contract rising above 22,000. Yuan/ton strong resistance level.
Some institutions and cotton-related companies have analyzed that cotton spinning companies are currently resuming work and production. Coupled with the impact of epidemic prevention and control, the spot support for Zheng cotton needs to be restored. The long and short sides may start the game again around 22,000 yuan/ton, waiting for the basic Further guidance on aspects, policies and external markets. In addition, judging from the investigation of some cotton processing enterprises in Xinjiang, the main oscillation range of Zheng Cotton has moved up to 22,000-22,500 yuan/ton, which will stimulate a certain amount of hedging orders to enter the market and restrict the extent of the rebound of the CF2205 contract.
From February 6th to 7th, cotton processing enterprises and traders in Xinjiang and outside Xinjiang were significantly more enthusiastic in quoting than before the holiday. On the one hand, the Zheng cotton CF2205 contract exceeded 22,000 yuan/ton, and the basis quotation and fixed price of cotton were subsequently increased significantly. High-quality Lint production and sales are no longer upside down; on the other hand, some Xinjiang cotton companies are gradually increasing their loan repayment pressures, and they are increasingly eager to withdraw funds and settle down. On February 7, the price of cotton picked by the “Double 29” machine in the supervision warehouse in Xinjiang was 23,100-23,300 yuan/ton (gravity weight, truck transportation out of the warehouse is borne by the seller), which was generally 200-300 yuan/ton higher than before the Spring Festival.
A medium-sized cotton company in Jiangsu said that considering that the global cotton planting area is expected to increase significantly in 2022 and the U.S. CPI will exceed 7, emerging markets will welcome interest rate increases. Therefore, it is recommended that cotton processing companies in and outside Xinjiang increase their prices in the range of 22,000-23,000 yuan/ton. Large hedging (or arbitrage) efforts will minimize risks. February to April 2022 may be a critical window period for cotton processing companies to avoid risks.
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