Weak Cotton In 2020, The Lowest Price In Nearly Ten Years.

Recently, with the increasing number of lifted blockade, the resumption of export growth in the US, the rising load of textile enterprises in the lower reaches of the country, and the slight improvement in overseas orders, cotton prices have gone out of a wave of rebound, but the cotton price is still in the downstream channel. On the whole, the domestic cotton market is in a weak market this year.

Since the beginning of this year, domestic and foreign cotton futures prices have entered the downward channel, and prices have fallen. According to long Zhong monitoring data, as of May 22nd, domestic cotton spot price (3128B cotton standard) reached 11950 yuan / ton, down 1750 yuan / ton, or 12.77%, compared with the beginning of the year, and the spot price of cotton in April 2nd reached a minimum of 11000 yuan / ton, down 2700 yuan / ton compared with the beginning of the year, reaching 19.71% (see chart 1). Over the same period, the trend of domestic and foreign cotton futures prices showed a downward trend since the beginning of this year. In the early and middle stages, the decline of cotton prices in Zhengzhou and cotton was weaker than those in outer cotton, but both were in a state of falling cliff. By the end of May 22nd, the main force of Zheng cotton in China was near 11600 yuan / ton, and the US cotton main force was hovering at 57 cents / pound line (see chart 2).

Fig. 1 price chart of cotton 3128B in China

Figure 22020 price chart of main cotton and main cotton products in Zhengzhou

The weak market situation of cotton is particularly evident in the current basis. Generally speaking, taking into account warehousing, capital occupation and other reasons, the cost of cotton warehouse receipt determines that its price is higher than the spot price of cotton, and the current base is at a negative positive market. However, when the cotton spot market is stronger, the market price is upside down, and this is the case in the first quarter of this year. At the beginning of the year, the base point price resources were generally transported, but by the collapse of the global financial market, Zheng cotton accelerated its decline, and the cotton spot market prices lagged behind, leading to a shift in the cotton futures market base from the positive market to the reverse market. The current base also widened rapidly. As of March 19th, the cotton main force touched 11095 yuan / ton, and the base level expanded to more than 1000 yuan (see chart 3). Because of the obvious advantages of cotton futures spot trading, part of the lower reaches of the market are going into the bottom market, and the cotton warehouse receipts continue to flow out.

Fig. 3 trend chart of current cotton basis in China

After analyzing the fluctuation of cotton spot prices in the past ten years, we found that cotton is a product with frequent price fluctuations, and the average price of cotton has changed significantly every year. Judging from the price performance, by the end of May, the lowest annual average annual price of cotton took place this year, the highest annual average price of cotton in 2010. However, judging from the fluctuation range and other indicators, in fact, except for the lowest cotton price in nearly ten years this year, the overall fluctuation of prices did not jump out of its normal state as agricultural products. The fluctuation coefficient of cotton this year is only 10.06%, which is lower than that in 2010, 2014 and 2015 (see table below). Therefore, in the early days when the vulnerable cotton prices had bottomed out, the market participants were psychologically acceptable for the risk of falling prices and the wide concussion of short-term cotton prices. Before the new cotton market was launched this year, the possibility of repeated shocks of cotton prices was relatively large and there was a demand for a return of 12500 yuan / ton median line.

Fluctuation of spot price of cotton in China in 2010-2019 years

Remarks: the price is cotton year in time.