Currently, the cotton market has a strong bullish atmosphere, with many funds involved, and going long on dips has become the mainstream voice. This confidence comes from the fundamentals of cotton, as well as macroeconomic and monetary policies. It only took half a year for the main contract of Zheng cotton to rise from around 10,000 yuan/ton at the beginning of the year to the current highest point of 18,035 yuan/ton. The increase was beyond market expectations.
Just yesterday, driven by the strong rise in Zheng yarn, Zheng cotton contracts, which were originally weak and in need of adjustment, also set off a wave of gains. A cotton spinning professional believes that the number of cotton yarn warehouse receipts is currently small. Once a company receives a large number of goods, the warehouse receipts will not be able to meet the requirements of the recipients. This is the main reason for the direct price limit of Zheng yarn. At present, enterprises have sufficient orders, large profit margins, and workshops are already operating at full capacity. Enterprises are also less willing to go to the futures market to produce and deliver cotton yarn warehouse receipts. According to today’s latest market display, the price of Zheng yarn has reached 27,200 yuan/ton. Referring to the cotton yarn and cotton prices on the market, the middle price difference is much larger than the spot price, and the profits are more generous. To a certain extent, it stimulates enterprises to produce and deliver cotton yarn. Under such circumstances, the short-term surge could not be sustained, and the market returned to calm and remained high and volatile.
Whether there is room for cotton prices to continue to rise in the future? Judging from the current degree of market fermentation and the new year’s seed cotton purchase market, cotton prices are still likely to continue to hit new highs. From a technical perspective, Zheng Cotton is now in an upward trend channel. Without the influence of major negative events, even a short-term correction will be difficult to reverse the upward trend. From a fundamental point of view, before the launch of seed cotton, if the market has a strong bullish atmosphere and companies have a strong willingness to grab harvests, cotton prices in the new flower market will often show a pattern of opening high and moving low. Last year’s seed cotton purchase market was an obvious case. The price was very low at the beginning of the scale, and then got higher and higher. The purchase price of hand-picked cotton in southern Xinjiang once reached more than 8 yuan/kg. Later, as lint came on the market in large quantities, the price began to fall.
As for the price top this year, the author believes that the CF2109 contract will expire in one month, and CF2101 will gradually become the new main contract. Now its price high has exceeded 18,000 yuan. /ton, the future is still full of imagination.
What needs to be vigilant is that as prices continue to rise, the risk of market fluctuations will gradually increase. The amplitude of the fluctuations will become more severe as the price continues to rise, and the direction of the wind may change at any time. How? Managing and controlling risks is something that companies must do well. </p
