Recently, the performance of ICE cotton futures has been strong. The main contract has hit a new high in ten years. The Zheng cotton CF2205 contract has also hit the resistance level of 21,000 yuan/ton. The short-term market sentiment is optimistic.
Judging from the trend of Zheng cotton, the market has entered a shock rebound channel since December 2021. The bottom of each contract has been rising, and the operation is relatively stable. Funds have not risen rapidly, but have adopted the strategy of “boiling the frog in warm water”. Among them, Zheng The cotton CF2205 contract rose from 18,735 yuan/ton to 21,380 yuan/ton, an increase of 14.12% in just over a month.
Downstream cotton-using enterprises do not seem to feel strongly, but the author still recommends that cotton processing enterprises gradually enter the market in batches and proportional hedging when the main force of Zheng cotton rises to 21,500-22,000 yuan/ton. Once the price exceeds 22,000 yuan/ton, the hedging can be The insurance ratio reaches more than 50%.
At present, the comprehensive cost of supervised cotton in Xinjiang is about 23,000-23,500 yuan/ton (individual cotton processing companies may be slightly higher at 300-500 yuan/ton). Since mid-January, the quotation of “double 28” grade machine-picked cotton in Xinjiang warehouses has been quoted. It has risen to 22,600-22,800 yuan/ton, and the inversion between production and sales has narrowed to 200-500 yuan/ton. If the CF2205 contract exceeds 21,800 yuan/ton, the ginner will no longer lose money or make a slight profit selling “double 28” grade machine-picked cotton. Considering the high-priced lint cotton such as “Double 29 and Double 30”, it is even more important to lock in profits through basis difference, fixed price sales or hedging in a timely manner to minimize operating risks.
As the probability of the Federal Reserve shrinking its balance sheet in 2022 has greatly increased, the mutant strain of the new coronavirus epidemic continues to rage around the world, and the impact of the U.S. government’s bill banning the import of Xinjiang-related products will continue to ferment, supported by Khmer prices in 2022, countries in the northern hemisphere, including China, will Cotton planting area may increase significantly year-on-year. These factors are not conducive to cotton prices remaining high in the long term. Therefore, upstream cotton processing companies and traders still need to be cautious. It is a wise choice to unwind and settle down as soon as possible.
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