After the price of seed cotton continued to rise during the peak purchase period, Zheng Cotton’s market stabilized and continued to fluctuate within a narrow range. The market adjustment time was close to one month. According to the operating rules, it is impossible for the market to consolidate all the time. After the consolidation is completed, the direction must be chosen, up or down.
From a fundamental point of view, the market has both long and short factors, and now it is about seeing who has greater power. The price of seed cotton is high, and the cost of processing new cotton is high. The spot price is 2,000 yuan/ton higher than the market, and there is strong support on the cost side. Some people say that costs do not have support when they fall, but they are only half right. It is necessary to clearly distinguish whether cotton prices are in a downward trend or an upward trend. There is no unreasonable rise or fall, there is always a force behind it. Judging from the K line, Zheng Cotton is currently in an upward trend, and short-term costs are still supported. Therefore, it is difficult for the futures-to-spot price difference to return in the short term. The January delivery time is approaching. Whether it will return by then depends on the reactions of all parties in the market.
On the other hand, once the second phase of reserve cotton is completed, the market supply will be reduced and the pressure on market spot resources will be reduced. It is necessary to pay attention to whether Zheng cotton will rebound appropriately. Nowadays, downstream companies’ raw material inventories can basically only be used until January, and they are facing greater purchasing pressure. After January, companies can only use high-priced raw materials, and downstream demand will be critical at that time.
It is reported that downstream production and sales are not optimistic. Enterprises’ finished product inventories are accumulating, especially cloth inventories, which are under greater pressure. In the absence of significant improvement in downstream consumption, there is great pressure on cotton prices to rise, and the market has no boosting force. After all, cotton is produced and sold every year. When the output is determined, later sales are crucial. In addition, with the recovery of operating rates in India, Pakistan, Vietnam and other countries, international orders have decreased, and my country’s cotton textile exports have also shown a downward trend. Therefore, the key to determining the future rise and fall of cotton prices is consumption. Once consumption stabilizes, the cotton rising channel will remain intact. On the contrary, it may turn into a decline.
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