Why Does China'S Cotton Futures Weak?

On the evening of 20, the first exchange call between China and the US dollar expressed mutual views and concerns on the two countries' economic and trade cooperation. Under the background of the first stage agreement between China and the United States, the two countries are heading for each other. Undoubtedly, it is a strong drug to boost cotton market. But today, Zheng cotton is a bit weak. It seems that the trend is out of proportion to the news.

According to the national cotton market monitoring system, in 2020, China's cotton planting area was 45 million 875 thousand mu, down 2 million 68 thousand mu, down 4.3%. Among them, the cotton planting area in the middle and lower reaches of the Yangtze River is about 3 million 947 thousand mu, down 19.5% compared with the same period last year. The area of the Yellow River basin's cotton planting area is 6 million 348 thousand mu, a decrease of 8.2% compared with the same period last year. The cotton planting area in Xinjiang is 34 million 927 thousand mu, down 1.1% from the same period last year.

The negotiation is good, superposition intention cotton planting area reduction has not been able to let Zheng cotton get out of a Yang line, some unexpected. Of course, the lower reaches of the market are in the off-season. The slowdown in the pace of replenishment of spinning enterprises is partly responsible, but I believe the main reason may be that the main funds are putting the long line to catch big fish.

This year, due to the market situation, the cotton mill at the beginning of the scale is at low price, but some of the enterprises with high processing cost can not be set up, especially in southern Xinjiang. Under such circumstances, only the funds are constantly being moved to make up for the washing up, the disk will continue to shake and attract the hedging disk to intervene. By then, once the market has started, the huge volume of warehouse receipts will be locked, which will lead to a resonance upward trend.

Of course, some enterprises have hedged through the operation of cotton options, but for most enterprises, they face greater risks. Warehouse receipt volume is a grey rhinoceros in the market. We all know its existence, but when it breaks out or there are problems, people don't know.

I believe that it is not very realistic for Zheng cotton to go up too high in the short term. After all, Sino US economic and trade negotiations are still continuing. The two countries have not yet lifted their tariffs altogether. It is very difficult for us to resume the price level before taxes. There are many other uncertainties in the future market. How the trend should be changed should be based on the market.