Cotton Market Performance Weak, Zheng Cotton Temporarily Difficult To Break Through The High Point

On Tuesday (January 26), the domestic stock market and commodity futures market went green, and cotton futures also fell, falling below the level of 15000 yuan / ton. Recently, the trend of domestic cotton is obviously weak. Even if ice cotton prices continue to set new highs, the domestic cotton will not be strong enough to attack. Since January 8, it has not touched 15600 yuan / ton. In the author's opinion, the decline and adjustment of ice cotton, the large price difference between domestic and foreign cotton and the weak demand at the end of the year restrict the rise of cotton price.

Ice cotton continued to rise, expectations are lower and lower

Ice cotton futures began to rise gradually since the beginning of April last year. The author thinks that there are three factors driving the price to rise continuously: first, the outbreak of the new crown epidemic caused the commodity market panic, ice cotton fell below 50 cents / pound, ushered in the oversold Second, the fund continued to increase the number of cotton orders in Global trade, epidemic prevention and control and economic stimulus plan, with ice cotton rising from 65 cents / pound to 80 cents / pound. Third, the cotton sales progress in the United States is much higher than that of last year. So far, the cotton sales volume in the United States has reached 12.16 million bales in 2020 / 21 Compared with 11.86 million bales in the same period of last year, the current annual sales volume is equivalent to 86% of the USDA's export target, and the sales progress in the same period of the past five years is 73%.

At present, the rise of ice cotton lacks new themes. USDA has reduced the US cotton production for two consecutive months, and the probability of further reduction in the February report is very small. The only thing the market is looking forward to is more short market. In the case of tight spot supply, the fund has been making long contracts in recent months, similar to the market in the first half of 2018. However, the difference is that at the end of January 2018, the net number of cotton orders held by the fund reached 120000, but now it is less than 80000. Moreover, it has reduced the number of cotton orders for two consecutive weeks. Therefore, the market began to puzzle whether ice cotton could continue to rise, while domestic cotton responded in advance.

Domestic cotton price is overvalued, and the price difference between domestic and foreign cotton is large

Although the domestic cotton price has fallen in recent two weeks, ice cotton futures remain firm, but the domestic and foreign cotton price gap is still at a high level. According to the data of China cotton net, the price difference between domestic and foreign cotton on January 27 was 1214 yuan / ton, still higher than 800 yuan / ton between collection and storage. There are two possibilities to narrow the price gap of cotton at home and abroad, that is, the domestic increase is less than that of the external market, or the domestic decline is greater than that of the external market. In either way, the domestic cotton price is overvalued. Since December 1, 2020, the price difference between domestic and foreign cotton has not reached the starting conditions in the past two months. If the price difference between domestic and foreign cotton is reduced to less than 800 yuan / ton, the domestic cotton price should be more than 2% lower than that of foreign cotton, that is, ice cotton should rise to 85 cents / pound, while the domestic futures price should remain below 15200 yuan / ton.

Cotton demand weak, flower, yarn price double day

Domestic cotton rose sharply in early October last year due to centralized purchasing. However, with the decreasing demand for cotton yarn and the sharp rise in futures prices, cotton enterprises in Xinjiang have made profits and increased their efforts to sell cotton. Cotton mills increased their purchasing volume due to the improved demand. Mainland cotton textile enterprises said that since October last year, cotton inventory has been maintained for about two months, which is enough to meet the demand after the Spring Festival, and the willingness to purchase cotton before the end of the year is not strong.

Different from the recent downturn in cotton prices, cotton yarn prices are high. The price of 32 cotton yarns in Xinxiang, Henan Province is quoted at 23000-24000 yuan / ton, while the cotton cost is generally at 15000 yuan / ton, and the spinning profit is as high as 2000 yuan / ton. Due to widespread concern about the late demand of overdraft with high profits in the past two months, especially the appreciation of RMB, the sharp rise of sea freight and the shortage of containers, which "ate" the profits of overseas orders, affected the enthusiasm of cotton textile enterprises to purchase cotton.

In the case of the rise in foreign cotton, domestic cotton performance is obviously weak, the price difference between domestic and foreign cotton is large, cotton import volume in December reached a new high in nearly four years, coupled with concerns about the weakening demand in the later stage, restricting the rising space of cotton. Unless the epidemic situation at home and abroad is greatly improved and orders can be sustained, it is difficult for cotton to get rid of consolidation trend.