Market Analysis: Focus On The Short-Term Situation Of Zheng Mian, Which Will Maintain A Volatile Pattern

Xinjiang's cotton production increased significantly this year, and the total output of the country is expected to reach the highest level since 2013. According to the data from China Cotton Quality Notary and Inspection Website, as of March 16, the public inspection volume in Xinjiang had reached 6.6366 million tons, exceeding the 6.5 million tons previously expected by the mainstream market. Considering its daily increment of 3200 tons, it is estimated that the final output of Xinjiang will be 6.65 million to 6.7 million tons.

Based on the lower value of 6.65 million tons in this region, and the estimated mainland output of 278000 tons by the cotton information network, the total national output is 6.928 million tons, an increase of 138000 tons from the 6.79 million tons in the previous high-yield year (2022/2023 season), which is The highest value since the 2013/2014 season, that is, the highest output in ten years.

The high output has brought more hedging demand than in previous years, and the overall hedging willingness of Xinjiang is strong in this production season. The cost difference between the north and south of Xinjiang has formed a two-tier centralized hedging pressure line. Under these two levels of pressure, cotton prices have limited room to rise.

In February, cotton prices rebounded under the support of downstream stocking and the expectation of the peak season of "gold, three silver and four". Although the price has not yet reached the previous high level, some low-cost ginning plants in Beijiang have started to actively hedge, and cotton prices fell again after several days of shocks. On the whole, the pressure above Zheng Mian is still high.

In terms of demand, from the end of the Spring Festival holiday to the beginning of March, the market generally reflected that there were few new orders, mainly orders before the year. The operating rate of cotton mills and textile mills is at a low level in the same period over the years, which is reflected as the weakest start in three years in some regions. Based on the cautious attitude towards the future market and the protection of the cash flow of the enterprise, the raw material inventory has been maintained at a low level for a long time, while the finished product inventory is neutral and high. At this time, the situation that the demand in the peak season was less than expected has emerged, the market confidence has been frustrated, and the "Golden Triple" has had a bad start.

　　3 In the middle of June, the warming weather led to the marginal recovery of domestic demand. The feedback from the domestic market in Guangfo has improved, and the operating rate of Zhangcha Weaving Factory has also increased significantly. In addition to the price reduction promotion of large mills in Shanghai Yarn Exhibition, the price of mainstream 32S and 40S yarns has decreased, and the weaving factory has started to increase cotton yarn procurement as a whole, and the gray fabric inventory has also been slightly reduced.

At the same time, the domestic policy side continued to release positive signals, announced that it would cut the reserve ratio and interest rate at the right time, and put forward a number of plans to boost consumption, which led to the recovery of market confidence. Some large upstream enterprises also began to actively stock up, and the cotton basis rose. However, there was a similar round of order recovery in the same period last year, which quickly led to a round of rebound in cotton prices, but the sustainability was insufficient, and cotton prices subsequently fell. Downstream feedback is that the main period for the "Golden Three Silver Four" to receive orders is usually from the Lantern Festival to the Tomb Sweeping Festival, so we need to continue to pay attention to the sustainability of this round of order recovery.

In the short term, Zheng Mian will maintain a volatile pattern, which is mainly affected by two factors.

On the one hand, this year's cotton output is expected to reach the highest level in the past decade, and there is a large demand for hedging at the origin, which limits the upward space of cotton prices.

On the other hand, the demand situation is still unclear. Although it has entered the traditional peak season of "Gold, Three Silver and Four Silver", March started poorly. However, with the recent warming of domestic temperature, the domestic market has improved. Downstream stocking actively supports cotton prices, and the overall demand situation needs further observation.