How To Deal With Unstable Cotton Price

The U.S. Department of Agriculture released its June supply and demand report, reducing global cotton demand. Finally, domestic downstream demand is low. Combined with the above three reasons, cotton may still maintain a weak position in recent years.

The price of cotton has dropped almost 40% in the last two months. It seems that such a big drop can't be expressed by a simple "supply-demand relationship", because China's export data is still very good. Why is there such a big drop?

Cotton this week has a hot event, is the harvest and storage. Many people may feel that the purchase and storage is a boost to cotton prices. But in fact, we released a storage capacity of 300000-500000 tons from last Friday. Such a quantity is a drop in the bucket for the high cotton inventory, and can not play an urgent role.

On the other hand, the collection and storage is actually based on the market price. After the highest price reaches 18600, it may stop collecting and storing. We can also see that the policy side does not want to intervene in the market more, but to a certain extent, wants to stabilize the price of cotton. Therefore, in the recent period of time, the effect of purchasing and storing on cotton prices is relatively limited.

Looking back over the years, the purchase and storage are actually carried out at a time when cotton is in a weak position. It may have a limited role in boosting the recent price of cotton. In the future, we can pay attention to the second round or the strength of the subsequent collection and storage plan or the implementation time.

On the other hand, this week, the U.S. Department of Agriculture released its June supply and demand report. In this supply and demand report, it reduced global demand for cotton, including also increased the end of the global cotton inventory. In fact, there is a negative impact on cotton prices in the United States, including the overall situation of cotton price decline.

Third, the domestic downstream end. At present, the downstream orders of textile mills are very, very insufficient. We have been saying that "confidence is more important than gold". Now the market is expecting the follow-up orders, which may maintain a downturn before the peak season of "gold, silver and ten". Moreover, they will purchase cautiously because of this order. Because the price of cotton continues to decline, or as a cotton spinning enterprise, I will worry about whether the cotton price is not bottoming out. I also want to wait for the cotton price to stabilize before arranging my purchase plan.

Therefore, for cotton mills, their recent procurement plan is also biased to the downturn, basically purchasing on demand, for the elimination of cotton inventory, it has not played a role in boosting.

Combined with the above three reasons, it is necessary to see a sharp rebound on Friday, but cotton may still maintain a weak operating posture recently.