Recent Cotton Futures Market Trend Analysis: Is It A Reversal Form?

Let's first review the recent trend of cotton futures and explain whether this is a reverse form by observing the spread of the upstream and downstream industries.

From a technical perspective, the two bottom and not broken can be regarded as the effective bottom. The two lowest price point appeared in June 6th and July 11th, respectively, 12720 yuan / ton, 12750 yuan / ton. So let's consider 12700 yuan / ton as the bottom of the market. From last week's K-line chart, it looks like the reverse form of the cross star, but when the commodity price is weak, its average daily turnover is at the 300 thousand hand level, and it does not belong to the stalemate between the two sides. So what is the situation? I think it should belong to the weak trend of shrinking volume after the withdrawal of funds, which is not a reversal of price.

So why did the price rise from 12980 yuan / ton to 13300 yuan / ton on Monday? In fact, this is mainly based on the announcement of the US tariff waiver for 110 industrial products from China during the Osaka summit. The corresponding Chinese enterprises also expressed the plan to continue importing relevant agricultural products in the United States, including cotton. Now that there are still more than 1 months to go, we are about to face seed cotton scale. In theory, futures prices will be callback. Because the cost of cotton production last year was around 15000 yuan / ton. We can see whether there is such a space from the industrial status quo.

On the supply side, prices are still showing a downward trend from domestic and foreign price indices. Last week, the average price of picking cotton for nearly 7 days was 13928.57 yuan / ton. The average delivery price of nearly 30 days was 14076.67 yuan / ton, currently 13900 yuan / ton, Zhou Yue average price fell -176.67 yuan / ton; CotlookA to port (1% customs duty), the average price of nearly 7 days was 12724.53 yuan / ton, the average price of nearly 30 days was 13072.84 yuan / ton, at present 12862.32 yuan / ton, the average price of Zhou Yue dropped by -348.30 yuan / ton.

As of July 23rd, the price of Xinjiang cotton was 13900 yuan / ton, and the COT A to port price was 12862.32 yuan / ton with 1% quota import, and its import profit was nearly 1204.04 yuan / ton for nearly 7 days. The average price of nearly 30 days was 1003.83 yuan / ton. This is mainly due to the larger drop in cotton prices, resulting in the expansion of profit space. Although the international market cotton can better highlight the price advantage, but the volume is not better than the domestic market, the current more active auction, last week, the reserve cotton price of 13227 yuan / ton, the rate of exchange is also above 95%.

Demand side, the current polyester staple price quoted 7920 yuan / ton, cotton polyester, cotton sticky price difference of 6143 (last week 6077.86) yuan / ton, 2363 (last week 2305) yuan / ton. The former spreads 155.42 yuan / ton, and the latter spreads -395.60 yuan / ton. Its short time PTA skyrocketing resulted in the price increase of PET staple. We can see from the Yellow trend line of the graph that the expansion is due to the large sale of the PTA over-the-counter derivatives in the Sino US extension company, resulting in a price return. Of course, the protagonist of gambling on gambling has suffered a lot in the price rise, including a number of Futures Company subsidiaries. Therefore, the overall view of natural fiber and chemical fiber does not have an upward foundation in terms of price.

As of July 23rd, the current cotton base is 663 yuan / ton, the spot premium CF1909 is 945 yuan / ton, and the 9-1 price difference is 625 yuan / ton. Is the base and premium reasonable? It is relatively high in historical basis, that is, futures prices are undervalued. It is fair to say that the arbitrage of the speculative price in the market and the arbitrage at the end of the industry will make the futures price gradually return to the spot, but it is not what we imagined. The spot market is not well shipped, and the disk price is at a low level. Even if the seller can smoothly lock the base, the profit margin is very small, and the circulation cost of cotton in the market is fixed with time, plus time storage and other fixed costs. Even if there are buoyancy, the futures market will not be able to cash in if the downstream orders are dim. Generally speaking, we should maintain a concussion.

To sum up, the internal price of the industry shows a weak trend, and its domestic demand does not play a supporting role in futures prices. Although there will be more than January to face the new flower opening scales, the seed cotton purchase scale will be faced with low price pressure. Overall, the main contradiction in the short-term impact on prices is still expected in trade. If domestic and long-term industrial domestic demand is still weak, if ICE cotton falls below 60 cents / pound support line, there will still be room for exploration in domestic cotton, and for the time being, 12000 will continue to maintain a concussion. For example, stability and strong support 13000 still maintain a general trend of shock. Nearby. Therefore, the short-term CF1909 proposal is mainly based on concussion, and the short-term rebound is high and low absorption. 13000-13500 overall, it remains a shock situation. If you are interested in cotton options, you can also match some part of the call option.