Since August, Zheng Cotton has experienced a roller coaster market. Currently, the long and short sides are in a stalemate around 17,500 yuan/ton, waiting for guidance from fundamentals, policies and external markets. The author believes that with the support of strong expectations for price increases for seed cotton in 2021/22, the central bank’s loose monetary policy, and the continued collective rebound of global commodities, the main contract of Zheng Cotton has a high probability of returning to 18,000 yuan/ton.
What short-term factors restrict Zheng Cotton’s rebound? The author summarizes the following points: First, the negative impact of the Fed’s release of QE reduction expectations at the July interest rate meeting on the U.S. stock market and commodity futures market will take time to repair (crude oil, etc. have fallen significantly), and ICE, Zhengzhou Cotton, etc. have been deeply dragged down by external news; Second, the negative fundamentals of domestic cotton have yet to be digested. Affected by the early placement of holiday orders, sharp rise in sea freight, and difficulty in finding containers, the industry is increasingly concerned about the textile and clothing production and sales situation from September to November; third, according to the survey results released by relevant agencies, Xinjiang cotton production will be reduced in 2021/22 Expectations have narrowed significantly; fourth, although Southeast Asian countries such as Vietnam and Indonesia are deeply trapped in the “quagmire” of the epidemic, the focus of orders has shifted to countries such as India, Bangladesh, and Pakistan, and return orders have been significantly lower than expected. </p
