In the past week, Zheng cotton has continued to rebound, with the CF2109 contract breaking through the resistance level of 15,800 yuan/ton from 15,300 yuan/ton, with the momentum pointing directly to the 16,000 yuan/ton mark. At present, regardless of the futures market or the spot market, the differences between the long and short sides are still very large. Is there still a chance for the short-term main contract to fall back to the 15,300-15,500 yuan/ton range?
Some cotton-related companies and institutions believe that currently more than 85% of domestic circulating cotton resources are in the hands of cotton trading companies and futures companies. For cotton companies with high hedging rates, In terms of price, Zheng Mian will be more advantageous if he dives to the bottom again. From the perspective of reducing costs and improving the competitiveness of gauze, cotton spinning mills and other cotton-using enterprises hope that cotton futures prices will stop rising and stabilize. Only cotton processing enterprises that are not hedging or have too low hedging rates hope that Zheng cotton will return to 16,000 yuan/ tons above.
Although the epidemic outbreak in Southeast Asian countries has even gotten out of control since May, the author still judges that Zheng Cotton’s main contract is expected to test the early highs again. The reasons are briefly summarized as follows:
First, driven by the accelerated economic recovery of China, Europe and the United States, and the continued strong economic stimulus from the U.S. government, commodities are still in an upward cycle. On June 2, international crude oil prices continued to rise, with Brent crude oil breaking through the $70/barrel mark. In the domestic commodity market, iron ore, thermal coal and other previously high-profile focus products also show signs of making a comeback; second, the central bank has taken a heavy blow and raised the foreign exchange deposit reserve ratio from 5% starting from June 15, 2021. to 7%, the momentum of RMB appreciation has been suppressed, which is not only beneficial to China’s exports of cotton textiles, clothing, etc., but also the confidence of export-oriented enterprises in accepting orders has gradually recovered; thirdly, the inventory of finished products of domestic cotton textile enterprises is currently at a low level, and spinning profits are also relatively high , forming a strong support for the rebound of cotton futures; fourth, Southeast Asian countries such as India, Bangladesh, and Pakistan are affected by the epidemic, and the expectations of short-term orders from Europe, the United States, and Japan to return to Southeast Asian countries are not strong. In addition, the domestic sales market will usher in production and sales from August to September. During the peak season, cotton prices will also be supported. </p
