Since December, Zheng cotton contracts have continued to oscillate and rebound, and the main CF2305 contract has continued to break upward. Although the daily increase is not large, the pace is steady and bulls have strong confidence.
As the main contract opens at 14,000 yuan/ton and the shock range moves up to 14,000-15,000 yuan/ton, the hedging willingness of Xinjiang processing enterprises will continue to rise. Considering the temporary retaliatory outflow of cotton yarn and gray fabrics caused by the loosening of epidemic control, The craze for goods has subsided. At present, European and American textile and clothing orders are still mainly short-term and bulk orders (the order situation of a large number of small and medium-sized yarn mills in the first quarter of 2023 is not optimistic, and the Spring Festival holiday may be extended). The impact of rising employee infection rates on enterprises Due to factors such as factors that are difficult to subside in the short term, some institutions and cotton-related companies have judged that CF2305 will consolidate and fluctuate repeatedly in the 14000-15000 range, leaving hedging opportunities for cotton processing companies and traders.
The author believes that Zheng Cotton’s “down-to-earth” rise this time is the result of the combined effect of the domestic cotton industry and the frequent warm winds of external policies. The contribution of speculative funds is not large, but “three feet of ice does not freeze in one day”. It will still take a long time for downstream and terminal consumption to pick up and recover. There is a certain “empty rise” in Zheng cotton’s upward trend, and water needs to be squeezed out. Therefore, it is necessary to unwind and settle in the 14000-15000 range, or a large part of the cotton The best choice for processing enterprises.
On the one hand, fundamentals support Zheng Cotton’s rebound. Due to the overall lag in Xinjiang cotton processing, warehousing, and public inspection progress in 2022/23 compared with the same period last year, not only did the Xinjiang resources available for sale in November/December decrease significantly compared with the same period in previous years, but the number of Zheng cotton warehouse receipts plummeted compared to the same period last year (a drop of 80% -90%); coupled with the fact that since late November, the purchase price of seed cotton picked by 40 garment extension machines in Xinjiang has increased from 5.70-5.80 yuan/kg to 6.10-6.20 yuan/kg, the cost of lint has risen sharply (some companies have exceeded 14,000 yuan/ton) , supporting cotton futures rebound. In addition, as epidemic control has been relaxed across the country, the willingness of cotton traders and futures companies to enter the market to inquire about/purchase cotton has significantly increased. The market atmosphere has continued to become warmer and more active, driving the steady rise of Zheng cotton.
On the other hand, as the end of the year draws to a close, policy benefits come one after another. 10 measures to optimize epidemic prevention and control are released, the central bank invests another 650 billion yuan in MLF, and the Political Bureau of the CPC Central Committee meets to analyze and study the economic work in 2023 and set the economic work for next year. The keynote is to expand effective investment and promote consumption recovery. In addition, the Central Committee of the Communist Party of China and the State Council recently issued the “Strategic Planning Outline for Expanding Domestic Demand (2022-2035)” and Vice Premier Liu He of the State Council spoke at the fifth round of China-EU business leaders and former The Senior Officials Dialogue pointed out that we are extremely confident that China’s economy will achieve an overall improvement next year. The above series of favorable policies have promoted the rebound of the domestic stock market and commodity futures market.
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