Market Research: Reviewing Zheng Mian'S History In The Past 20 Years From Data

Since Zheng Mian came into the market in 2004, it has gone through three cycles from rising to falling, namely 2008-2016, 2016-2020 and 2020 so far. At present, the price of cotton is still in the third cycle of falling. First, we will review the factors that affect the rise or fall of the above three cycles at different stages.

2004-2008. 9: interval shock. Zheng Mian Central had a shock of 13000-16000 yuan/ton, which had experienced several rounds of policy acquisition and storage, but was also impacted by the entry of a large number of imported cotton. During this period, Zheng Mian's contract rules were still in the initial stage, and there was no clear requirement for the grade of cotton delivered, which was also the main reason for a large number of registered warehouse receipts of imported cotton. In 2008, the fundamentals matched the background of the macroeconomic crisis, and cotton prices fell all the way to the 10000 yuan mark.

From October 2008 to November 2013, it rose sharply. At the end of 2008, the rebound from the over drop of 10000 yuan was mainly driven by the state's purchase and storage of 2.79 million tons from August 21, 2008 to April 10, 2009. In 2010, USDA raised the cotton consumption expectation in 2010/11, and there was a gap between production and sales in that year; In China, the cotton planting season from April to May is cold, rainy, or even snowy. Weather factors push up cotton prices. Macroscopically, on November 25, 2008, the Federal Reserve launched the first round of QE, and China also launched the 4 trillion yuan rescue policy, ushering in a wave of bull market. At this stage, the cotton price experienced a sharp rise from 10000 to 35000 yuan/ton.

From April 2011 to September 2016: a sharp decline. After 2011, the negative feedback of high priced cotton appeared, and the downstream suppressed consumption, leading to cotton inventory hoarding. The difference between internal and external prices is too large, so that 40% tariff in 2012 can also produce import profits. Therefore, the import volume of foreign cotton has greatly increased, which has a great impact on the domestic market. In order to stabilize cotton prices, in 2011-13, China accumulated 16.5297 million tons of cotton. Macroscopically, the continuous fermentation of the European debt crisis has also led to a serious decline in the demand side. Zheng Mian continued to fall, falling to 9890 yuan/ton in March 2016, the lowest since the listing.

2016.10-2018.6: bottoming and rebounding. China's target price subsidies and purchase and storage support cotton prices. Macroscopically, the QE policy of the Federal Reserve has helped the global economy get out of the trough and demand rebounded. During this period, cotton prices rebounded from the lowest point to around 16000 yuan/ton. At the beginning of 2018, the United States provoked a trade war. At first, the market was cautious. In addition, China's cotton inventory was not high, and the price of Zheng cotton was maintained.

2018.7-2020.6: fell again. With the escalation of Sino US trade frictions, the export of Chinese cotton textile products to the United States is limited, and the gold and silver are falsified. As a result, the market is extremely pessimistic about domestic cotton demand. The cotton price hit the price level of 12000 yuan/ton in 2019. Subsequently, the domestic COVID-19 epidemic broke out, and under the pressure of macro pessimistic expectations, the cotton price once again fell below the 10000 yuan mark.

2020.7-2022.5: substantial increase. After the outbreak of COVID-19 in 2020, the Federal Reserve started the fifth round of QE. Countries followed the extremely loose fiscal and monetary policies, and asset prices rose significantly. At this stage, China experienced a very crazy rush to harvest in 2022, and Zheng Mian rose all the way to a maximum of 22960 yuan/ton.

2022.6-11: falling back. Global inflation is high, major central banks have tightened monetary policies, the world economy has shifted from overheating to stagflation, and demand has shrunk. The high price of domestic cotton is difficult to sustain, and the downstream negative feedback is obvious. Zheng Mian fell.

2022.12-2023.9: up. With the deregulation of epidemic control policies, there has been a periodic outbreak of demand in China. With the addition of factors such as Xinjiang cotton replacing imported cotton, the commercial inventory of domestic cotton is tight, pushing up the cotton price to more than 17000 yuan/ton.

2023.9 - So far: narrow decline. In the context of loose global cotton supply, domestic imported cotton replaced Xinjiang cotton, downstream orders were weak, and cotton prices fell back to 15000 yuan/ton.

Summary:

About the low point: the cotton price reached the 10000 yuan mark three times in the history in 2008, 2016 and 2020, which were all very poor in fundamentals and combined with macro factors to reach the extreme level of 10000 yuan/ton.

About the high point: the high point in 2011 is about 35000 yuan/ton, the high point in 2022 is about 23000 yuan/ton, and the high point in 2023 is about 17000 yuan/ton. It can be seen that the high point of price is constantly moving down in several cycles. This is also due to the increasingly mature and stable domestic policy of buying, selling and storing, and the strengthened control over prices in the extreme rising market. Considering that the national reserve inventory has been replenished again in 2023/24, generally, the high range of panel price is 17500-18600 yuan/ton. Only in the context of extreme production reduction and implementation of supply, there is the possibility of impacting 20000 yuan/ton.

On the whole, 12000-16500 yuan/ton is a conventional operating range for cotton, and 12000-13500 yuan/ton is an undervalued range in the absence of a macro attack. Therefore, long-term layout of multiple orders can be considered. However, it is difficult to judge the high point valuation. It is generally believed that under the background of sufficient national reserve stocks, the high point valuation can be reached when the price is more than 18000 yuan/ton.