Market Analysis: Various Factors In The Global Cotton Market Need To Observe The Future Trend

With the mass listing of Xinmian, there is a greater risk of falling back on the market. It is expected that the resistance of 14500-15000 above will be strong. However, due to the limited global supply easing this year, the start of the interest rate reduction cycle of the Federal Reserve and the long-term expectation of the domestic economy guided by China's policies, the low value will increase the buying interest. Therefore, Zheng Mian may not look too low down, and the support level below is about 13000, The low point may appear in November. With the release of supply pressure, considering the early Spring Festival this year, the downstream cotton yarn has continued to go to the warehouse for nearly a year, and the social inventory is approaching the normal range. In addition, after the "peak season is not prosperous, and the off-season is lighter" this year, the textile industry may have some supplement orders and return orders near the Spring Festival, which will add to the demand for goods preparation before the festival. At that time, the downstream market may have a certain positive boost to cotton prices, which needs attention.

Although the Federal Reserve has started the interest rate reduction cycle, the current interest rate is still far higher than the neutral interest rate level. The U.S. labor market will further weaken in 24Q4, and the U.S. macro-economy is still in a downward trend. The pace of subsequent interest rate cuts depends on the degree of economic decline. Therefore, in the early stage of the interest rate reduction cycle, the macro forecast is still downward, External macro financial market transactions may face frequent switching between interest rate cut transactions and recession transactions, and the US election may also bring volatility risk to the financial market.

On the domestic side, the policy continues to increase its weight, turning the domestic macro-economic expectations. The capital driven stock market and the bulk futures price take the lead, but there are still twists and turns on the upward path of the actual economic fundamentals. At present, the country is in a state of strong economic prospects, but the reality is facing greater uncertainty. We need to pay attention to the follow-up efforts and implementation of policies; Long term consumer confidence has improved, but in terms of the current economic reality fundamentals, it may be difficult for consumers to give too high expectations in the short and medium term.

In the long run, the Federal Reserve has started the interest rate reduction cycle, and China's policies have led the domestic economy and consumption prospects and confidence to improve. Risk assets may enter a long-term spiral upward trend, but the economic reality of strong expectations and lagging economic growth in the early stage may cause greater market volatility.

　　 Domestic market:

1) New cotton acquisition is expected to open high and go low. This year, the ginning plant may start weighing against the panel, but the formation of the mainstream purchase price later is the result of the game among all groups in the industry, which in turn affects the driving panel. Before the National Day holiday, because the supply of high-quality cotton from old cotton was tight, the basis was high, and a large number of new cotton had not yet been harvested and listed (the excessive rainfall in September delayed the listing of Xinjiang cotton), new cotton sets were less guaranteed. Under the influence of the external macro profit atmosphere, Zheng Mian was able to rise rapidly, and the opening price in some areas of Xinjiang was high at the end of September. However, after the National Day holiday, a large number of new cotton will come into the market. In combination with the expected increase in Xinjiang's output this year, while the downstream textile business continues to be poor, demand is weak, and textile enterprises have limited tolerance for raw material prices, which means that if the price is high after the purchase and processing of ginning plants, it is expected that the goods will be sold slowly. However, ginning plants are very cautious this year, In recent years, their losses and capital constraints have made them less willing and able to bear risks. They are expected to focus on the low inventory strategy of fast purchase, fast processing and fast sales. If the sales are slow, they are bound to reduce the price and take the goods. Therefore, we expect that this year's purchase price of seed cotton may rise, fluctuate and fall, which will further drive down the market. The average value of the purchase and processing costs and the upside down of the market is expected to further reduce compared with the previous two years. If the futures are at a high level, it will inevitably bring a lot of hedging pressure; The basis difference of new cotton is expected to be high before and low after.

2) The pressure of centralized listing and supply of new cotton at different stages is great. New cotton will be harvested and listed in the fourth quarter. Considering that ginners have strong risk aversion and are unwilling to hold a large number of stocks, large growers have experienced a large loss of processing in the past years, and their reluctance to sell has weakened this year, downstream textile enterprises have limited cotton to digest in the short term, and the lack of new orders makes them less willing to stock up raw materials The new cotton season is now upside down and the expected basis is high in the front and low in the back, or it will also limit the purchase pace of traders, which means that about 6 million tons of Xinjiang new cotton is centralized on the market while the downstream undertaking is insufficient, which may bring downward pressure to the market.

3) The downstream textile peak season is not prosperous, and the industry confidence is insufficient. At present, domestic textile industry has entered the traditional "golden nine and silver ten" peak season. Although the marginal improvement of orders has occurred since August, the characteristics of the peak season are not obvious, and "golden nine" has failed. Judging from the orders and inquiries of downstream textile factories, "silver ten" may not give great expectations. Textile enterprises, especially those in the mainland, continue to have poor production profits and lack of industrial confidence, It will restrict its ability to bear the price of raw materials. The next time to look forward may be the market before the Spring Festival.

4) Outflow pressure of obsolete warehouse receipts. 23/24 The remaining warehouse receipts of the year must be written off at the expiration of the contract in November. It is difficult for these resources to flow out, and it is necessary to give a sufficient discount. The contract in November is approaching its expiration, which will face greater pressure, and the forward contract may be dragged down.

　　 International market ：

In 24/25, the cotton production estimates of the United States and the world continued to decline, and the final inventory and inventory sales ratio of the United States and the world were expected to decline month on month, but the overall situation is still loose. At present, cotton in the southern hemisphere is being supplied in large quantities on the market, while cotton in the northern hemisphere is entering the late growth period and approaching the harvest period. The production and supply are gradually becoming clear, and the focus of the subsequent market will gradually shift to the demand side. However, it is hard to be optimistic about the demand outlook in the short to medium term. In particular, the export pressure of American cotton is expected to be large, and the seasonal supply pressure is expected to be more obvious after the listing of American cotton and Xinjiang cotton in the fourth quarter. The continuing upward trend of ICE1 contracts in December will also face strong hedging pressure.

At present, the external market is above 70 cents, and the space for further upward movement is expected to be limited. We believe that the possibility of weak volatility in the fourth quarter is greater. However, considering that USDA has continuously reduced the output and inventory sales ratio of American cotton and global cotton, the expectation of loose supply and demand is much lighter than that in the earlier period. From the perspective of fundamentals, the downward space of the external market is also expected to be limited. Overall, the estimated operating range of the outer disk is 75-80 cents/pound at the upper edge and 65 cents/pound at the lower edge.