Recently, most commodities have experienced a correction, with Zheng cotton falling by more than 1,200 yuan/ton from the previous high. There are many reasons for this round of adjustment, but the author believes that cotton prices rose too much in the early stage and the market needs to cool down, otherwise it will be detrimental to the healthy operation of the industry.
On March 4, local time in the United States, Federal Reserve Chairman Powell said in an online interview that with the widespread vaccination of the new crown vaccine, the new crown pneumonia epidemic in the United States has eased, and the inflation rate is expected to rise in the future. Trending upward, interest rates remain unchanged. However, Federal Reserve Chairman Powell did not give a clear signal of rescue action in response to the recent surge in U.S. bond yields. This move caused U.S. bond yields to surge again during the session, accelerating the decline of U.S. stocks and continuing the previous decline led by technology stocks. The domestic market has been affected by the continued decline in the external market, and cotton is no exception.
Although cotton prices have fluctuated sharply recently, the fundamentals have not changed much. According to data from the National Cotton Market Monitoring System, as of February 26, a total of 4.200 million tons of lint cotton had been sold nationwide, an increase of 1.269 million tons year-on-year and an increase of 1.100 million tons compared with the average of the past four years. The sales progress is better than in previous years, indicating that the cotton market is booming in both supply and marketing. Especially with the recent sharp rise in cotton prices, companies are actively stocking up, and the scale of raw material inventories is much higher than the same period last year. Although the data is in the past tense, it at least shows that downstream demand is good, and the previous rise is supported by fundamentals.
It is understood that with the rapid rise in prices in the early stage, downstream textile companies have begun to take orders cautiously. After all, the continued rise in cotton prices will only increase the operational risks of the companies. Now the company’s orders have been maintained for about one month, and the inventory has also been reduced. Larger, so when cotton prices rise, there is no rush to purchase. On the contrary, falling prices is a good opportunity to price.
On the 5th, cotton prices showed no signs of stopping their decline, and it is expected that this round of adjustment will take some time. When to stop falling depends on the actual situation on the market, but the author believes that after this adjustment, the rise in cotton prices will be more healthy. </p
