The Central Bank'S Favorable Policies Strong Trend Of Cotton Price Forecast

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Recently, the cotton spot market has gradually entered the opening and closing season of the new production season, while the overall trend of Zheng Mian and American Cotton has shown a strong trend of continuous growth. However, the market still maintains the expected attitude of increasing production in the new production season, which deviates from the recent actual performance of prices. Here we look at the recent performance of cotton from the perspective of valuation and drivers.

In terms of valuation, the cotton price has been running at a low level for a long time, and the ginning profit and spinning profit are both hovering at a historical low. The cotton price has already fallen below the cotton purchase cost of the last production season, but for cotton yarn, the raw material price is still high, and the cotton yarn textile profit is also very bleak.

The improvement of marginal performance in the downstream of the industrial chain is the industrial basis for this round of cotton price rebound. The long-term accumulation of downstream stock in this production season has continued to depress the industrial operating rate, thus the enthusiasm for raw material procurement is low, and the demand side cannot provide favorable support for cotton prices. However, the bottoming rebound of downstream operating rate since the second half of August has improved the above status, mainly due to the inventory reduction in downstream and the action of textile enterprises and textile enterprises to replenish the stock. In the international market, the marginal increase of drought in American cotton producing areas has contributed to the continuous decline of the excellent rate of American cotton. The USDA balance sheet's expectation of American cotton production may have room for downward adjustment, and the market's valuation of American cotton needs to be adjusted upward.

Secondly, the domestic cotton producing areas have begun to acquire sporadically. From the situation of nearly half a month, Xinjiang machine picked cotton said that the purchase price was about 6 yuan/kg, which exceeded the market's expectation of 5.5-6 yuan/kg, while the mainstream price of 40% lint of hand picked cotton seed cotton was 6.9 yuan/kg, which was on the high side of the overall price. However, it has not yet entered the period of comprehensive acquisition of ginning plants. The total amount of seed cotton listed is not much, and the supply pressure has not been shown in the spot market for the time being.

On the macro level, the Federal Reserve announced a significant interest rate cut of 50 BPs on September 19, and then the People's Bank of China released favorable policies on reducing reserve ratio, interest rate, and stock mortgage interest rate on September 24, and the market revalued Chinese assets. As a variety that has been impressed by macro factors, cotton has also been significantly affected by the benefits of macro policies.

Although from the short-term perspective, the macro benefits and the phased benefits of the internal and external market industry have led to a sustained rebound in cotton prices, from the long-term perspective of the fundamentals, if the expected increase in production in the new production season is realized, and the domestic cotton imports are significantly increased year on year, the market will not be short of cotton supply, Therefore, it is expected that the height of cotton price rebound in this round is limited. With regard to the future market, with the deepening of the purchase stage of cotton in the producing area and the increase of the purchase progress of American cotton, it is expected that the supply pressure in the world's major markets will gradually emerge. Wait and see the cotton purchase during the National Day holiday and the changes in downstream demand after the National Day holiday.