“The disk is sometimes a naughty child, sometimes quiet and sometimes crazy. We always expect him to be stable, but it is always more unexpected than imagined.” Zheng Mian’s performance today perfectly explained this . This fluctuation is so abnormal. What is the logic behind it? This is probably the answer that most people want to know. The author is here to introduce some ideas, and the ideas provided are for reference only.
Last Friday night trading, Zheng Cotton experienced a deep correction, and the CF2001 contract fell below 12,000 yuan/ Ton mark, this plunge was accompanied by the market releasing news that Sino-US economic and trade relations may change. According to market rumors, the Office of the U.S. Trade Representative issued a notice and decided to resume the 25% tariff on more than 80% of the products in the fifth batch of products excluded from the extended list of products with a validity period of 34 billion ($34 billion in tariff exclusion lists). ! Zheng Mian, who had originally hoped to continue falling today, found a small positive line, which surprised the market.
There was also news of locust invasion last weekend. According to CCTV Financial Weibo, Pakistan’s Punjab, Sindh and other places were attacked by locusts. Wherever the locusts went, Crops were basically eaten away, which had a great impact on cotton, sugarcane and rice that were growing well. This year’s locust plague is a continuation of the 2019 locust plague in Africa, the Arabian Peninsula and South Asia. This is the most serious locust plague in decades, which has had a large-scale impact on local crops. The Food and Agriculture Organization of the United Nations estimates the damage to summer crops at approximately US$2.89 billion. Looking at the market, agricultural products such as sugar and cotton have indeed rebounded to varying degrees.
The author believes that the current stage is still a period of rising weather conditions, cotton prices are difficult to fall deeply, and the characteristics of strong bottom support have not changed. In the absence of black swan events during the growing period, the probability of cotton prices rising is greater than the probability of falling. In addition, companies have limited cotton spot stocks and can only purchase from futures prices, which also provides favorable support for cotton prices.
China’s economic activities are basically on the right track, the domestic consumer market is gradually recovering, and corporate orders are shifting from foreign trade to domestic demand. On May 31, the Service Industry Survey Center of the National Bureau of Statistics and the China Federation of Logistics and Purchasing released the China Purchasing Managers Index. The comprehensive PMI output index was 53.4%, the same as last month. The purchase price index of main raw materials and the ex-factory price index were 51.6% and 48.7% respectively, an increase of 9.1 percentage points and 6.5 percentage points from the previous month. Both were highs in the past four months. Among them, the purchase price index of main raw materials rose to the critical level. Above this point, corporate raw material purchase prices have increased. Therefore, from a macro data perspective, cotton prices do not have the basis for a deep decline.
On the other hand, the number of confirmed cases of the global epidemic continues to grow, and the risk has not disappeared. Among them, Russia, Brazil and other countries have grown rapidly, and European countries have stabilized and are resuming work and production in an orderly manner. After several months, the impact of the epidemic has been fully reflected and released on the market. In the absence of a vaccine, global foreign trade is expected to continue to remain low, and this normal will remain for a long time, which will put pressure on rising cotton prices. In particular, the United States is mired in the quagmire of the epidemic and riots and has no time to take care of it. Its economy has been greatly affected. Although it has announced the restart of economic activities, recovery will take a long time. The main contradiction between economic restart and the epidemic will remain in a tug-of-war mode. The forces of both parties are ebbing and flowing, and naturally the room for rising cotton prices will be squeezed. </p
