Market Analysis: Divergence And Prospect Of Cotton Futures Market

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Due to the lack of orders, the textile industry is basically flat in the current industrial environment, and the number of factories that have reduced their operating hours and had Spring Festival holidays has gradually increased. Only the enterprises that maintain the order production have rigid replenishment demand. From the perspective of seasonal comparison of raw material inventory, the current level of textile enterprises' stock preparation is higher than that of the same period of previous years. Under the irreversible downward trend of operating load before the festival, the number of enterprises that have started production has declined irreversibly, Short term replenishment demand may be poor. In the short term, it is the industry consensus to pay attention to the change of mentality of the other party of the game. However, the cash flow behind each enterprise is different. It is uncertain whether the price can be maintained or how long it can be maintained. According to the current state of the textile industry, the recovery of effective demand may need to wait until after the festival. Therefore, there is a great risk of holding cost in the post price gambling market.

In addition, reducing prices to speed up lint sales, recognizing the loss is another option for the current ginning plant. In the case of rolled in capacity, some enterprises may rush to admit defeat in advance, which will aggravate the overall mentality of the ginning plant from locking profits to rushing ahead to reduce losses.

With the further return of the basis in recent months, the long short divergence of the market is concentrated in the far month. The strong rebound in recent months has not brought too much boost to the long-term contract, and the huge futures discount still exists, to a certain extent, reflects the market's pessimistic supply and demand expectations for the future market: the peak growth rate of global textile and clothing consumption and the expectation of cotton production in the next year will promote the current high absolute price out of the mean return path.

In the case that there is no short-term downstream replenishment power, cotton commercial inventory is expected to further accumulate in the later period, and it is expected to see no significant driving force before the festival. In the future, the way to repair the basis of 05 contract will either lead to the reversal of consumption pessimistic expectation or accept the fulfillment of pessimistic expectation of weak supply and demand. Increasing production has become a consensus in the market, but whether consumption continues to weaken, the industry is more willing to wait for the answer after the holiday.

However, from the perspective of terminal consumption, apparel wholesalers have ushered in an active accumulation cycle in the U.S. market with good performance. The import supply speed is faster than the sales speed. Combined with the recovery of Southeast Asia's production capacity, the high internal and external cotton price difference will make domestic orders continue to face pressure.

If the reversal of consumer side does not come as time goes by, the pressure of cost will continue to suppress the mentality of ginning plants, and the recovery of basis will be mainly driven by the decline of spot prices. Under the background of the formation of market expectations, it is more appropriate to arrange 05 empty orders every high.

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