Last week, U.S. cotton futures fell to the limit, which made many industry players exclaim. ICE’s main 05 contract once fell below 80 cents/pound, pointing to the 75 cents/pound mark. Zheng cotton also showed a deep decline pattern, successively breaking through the important support levels of 15,000 yuan/ton and 14,500 yuan/ton. Cotton-related companies feel that the domestic and foreign cotton markets may bottom out after the Xinjiang cotton incident.
According to feedback from some cotton-related companies, prices fell sharply last week, and a large number of spot orders at point prices have been completed. From a short distance, cotton-related manufacturers, traders, and middlemen have made profits, but from a long distance, the follow-up situation does not seem to be so optimistic. First of all, domestic and foreign futures prices have been falling together, with no signs of stabilization. Some industry players even believe that Zheng cotton may break through 13,000 yuan/ton in the near future; secondly, buyers have stopped placing orders in unison, and there is basically no demand for domestic cotton or imported cotton. Inquiries, some cotton-related companies simply stopped quoting, indicating that short-term purchases and sales will be stranded; in addition, some downstream companies have also begun to accumulate products, especially terminal cloth factories and dyeing factories. Due to the surge in raw materials in the early stage, they are forced to reduce risks. It does not hold large orders, and the recent sporadic orders cannot support continued purchases, and all parties’ operations show signs of contraction.
In just one week, Zheng cotton prices fell rapidly from 15,500 yuan/ton to 14,300 yuan/ton, a cumulative drop of nearly a thousand points. The bullish atmosphere in the market has changed rapidly and the flight of long funds will put greater pressure on the cotton market in the near future. As the competition between China and the United States intensifies, inflation risks are shrouded and market news is complicated, “step back and wait and see what happens” has become the best choice for many cotton companies. However, futures prices have fallen deeply and have successively broken through the reasonable value and cost range, which may once again become a value depression for some investors’ forward investments, and will also provide strong impetus for the rebound of cotton prices in the later period. After all, the domestic epidemic is gone, textile and apparel exports continue to improve, and global demand is expected to rebound. </p
