Market Analysis: Short-Term Cotton Prices May Continue To Rise Slightly

The price of American cotton is still weak, and the market has no response to the continuous decline in the quality rate of American cotton. Pessimism is still the dominant factor, and it will take a longer time to restore market confidence. ICE cotton futures rose last Friday, due to the rise in crude oil futures, short positions were closed before the USDA report was released, allowing prices to backtrack. On Monday night, USDA will release the cotton supply and demand report for August, but from the data of last month, it is expected that the demand side will improve very little. The supply side has increased the output of American cotton last month, so the probability of further increase this time is small. The cotton futures of the Intercontinental Exchange (ICE) rose to a three week high on Monday. The report is neutral. When the demand side improves very little, the increase in the supply side will make the price depressed, and the prices of other agricultural products are also bottoming out. Zheng Mian fell back after the backdraft and lacked further upward momentum, waiting for the guidance of the external market.

In the domestic market, Zheng Mian once again hit a new low in the New Year. The spot price of cotton continued to fall, and the terminal purchasing sentiment was general; Last week, the issuance of import quotas was at a historically low level, which temporarily boosted the price of the period, but terminal demand did not improve significantly or will suppress the price of the period for a long time. The future price goes down with the trend, and it is expected that the short-term cotton price will fluctuate slightly. Textile and clothing export data in July was released, and the growth slowed down. There are no new negative factors in the fundamentals, and the macro disturbance has gradually subsided. However, cotton prices continue to weaken. One of the main reasons is that the current pattern of domestic cotton fundamentals is weak, and market sentiment needs to be boosted.

Downstream textile enterprises said that their orders are few and their production is in a loss state. Even though the futures price has fallen below 14000 yuan/ton, the cost of cotton used by mainland enterprises is still about 15500 yuan/ton when the spot price is added with the basis and freight. Now the cotton yarn futures price is less than 19500 yuan/ton, and the price difference between cotton and cotton yarn has narrowed to less than 5000 yuan/ton, Even Xinjiang spinning enterprises are in a loss state. For the textile enterprises in the mainland, the spinning loss is larger.

This year, the price of Zheng cotton has been in a continuous state of shock and decline, which makes enterprises feel that the bottom is not deep, which has a great impact on downstream orders. Because the cotton price has not bottomed out for a long time, downstream customers are cautious in placing orders, which has led to a significant decline in textile enterprises' orders for a period of time, the inventory of finished products has been accumulating, and the enterprise has great operating pressure.

In addition, the current price difference between internal and external cotton has been around 2000 yuan/ton. The price advantage of external yarn is significant, which has a great impact on the cotton yarn in the mainland.

At present, large textile enterprises can barely support, but small and medium-sized enterprises can only take measures to reduce production. Downstream textile enterprises have big differences in procurement. The order situation of large and medium-sized enterprises has slightly improved. The lint raw materials are mostly purchased at bargain prices in a moderate amount. Some enterprises with insufficient funds and high pressure on finished product inventory have small batch exploratory procurement. The overall market turnover has slightly increased compared with yesterday.

At present, the overall business situation of small enterprises in the mainland is not much better. There are many holidays. Large and medium-sized textile enterprises adopt peak avoiding production and other methods. Orders are slightly better, but the price is more serious. Therefore, there is still a long way to go before turning losses around, and it is difficult to effectively increase the startup rate. Downstream traders have made a small amount of replenishment at a low level, but the recent decline in futures has increased the uncertainty of the market, with only a small increase in transactions. At present, the operating rate of yarn mills in various regions is basically stable.

The short-term external market trend is weak, and the pattern of strong domestic supply and weak domestic demand continues. The expectation of weak "Golden Nine Silver Ten" peak season has increased, and the cotton price is lack of obvious upward drive. The short-term expectation is weak, focusing on the downstream orders in August.

Recently, Zheng Mian began to break down after a week of hard support at the Wansi Pass. Since then, Wansi will change from a support position to a pressure position, which can be seen from the downturn of the cotton market. Last week, the cotton market was worried about the pressure brought by the economic downturn in the external macro market. The cotton prices at home and abroad fell together, hitting a new low price since this year. As a result, the commodity holders suffered extensive losses. The spot order inquiry slowed down, and the market mentality tended to be cautious. With the rebound of US stocks and international crude oil prices, the mentality of market participants has improved, and cotton has rebounded from oversold. The short-term market focuses on whether the demand side can have a peak season effect, and cotton prices may continue to rise slightly.

On the whole, although the peripheral market has eased slightly, the fundamentals have not improved, and American Cotton is expected to maintain low volatility in the short term. At present, the overall fundamentals of Zheng Mian have not recovered significantly, and the short-term rebound is more the result of the compensation for the previous oversold and the repair of macro emotions. In the case of unclear implementation of downstream orders, even if the cash flow of enterprises has been repaired, it is still difficult to reverse in the short term.

Under the pressure of supply, the 09 contract may be difficult to improve significantly. On August 12, the main contract of Zheng Mian closed at 13625 yuan/ton, up 1.34%. At present, cotton has entered a critical growth period. In August, September and October, we need to pay attention to the weather in the United States and Xinjiang. In addition, July and August are the transition period for cotton to enter the golden nine silver ten textile peak season. This year, the United States textile and clothing wholesale inventory has been successfully removed from the warehouse. Later, we still have a phased purchasing power. At the same time, we need to pay attention to the trade policy risks that the U.S. election in November brings to China.