Global Perspective: Review Of Fluctuation Range Of American Cotton And Analysis Of Zheng Cotton Market

There is a strong correlation between the price trend of American cotton and that of Zheng cotton, but the fluctuation range of American cotton is relatively stable than that of Zheng cotton. In the past 20 years, the rate has fluctuated in the range of 60-90 cents/pound. In history, there were only three times that the range was significantly exceeded. Here we focus on the market that fell or broke through the range.

2008: falling below the lower range. The global economic crisis has had a significant impact on the cotton market. Cotton prices suffered during the year due to falling demand.

2009-2011: substantial increase. With the gradual recovery of the global economy, the demand for cotton has rebounded, but at the same time, the production of cotton in the United States has declined due to the reduction of planting area and adverse weather. In 2009/2010, the output consumption gap expanded to 16 million bales, which led to the continuous rise of global cotton prices. In addition, the strong import demand of China and Pakistan also led to the continuous rise of American cotton prices, which reached the highest level in history in 2011.

2012-2015: from falling to stabilizing. The increase in global cotton supply, especially in the production of major producing countries such as China and India, has led to oversupply in the global cotton market. Macroscopically, the continuous fermentation of the European debt crisis, the fluctuation of American interest rates, the depreciation of the US dollar and the decline of global inflation have had a negative impact on the global economy, leading to a decline in textile demand, which in turn has affected cotton consumption demand.

In 2020, it will fall below the lower edge and hit a low point. The outbreak of COVID-19 has led to a slowdown in the global economy, and cotton prices are under pressure. However, due to the economic stimulus measures of governments, the market gradually stabilized.

2021-2022: substantial increase. The major cotton producing countries suffered from severe drought in the United States and floods in Pakistan. As the global economy gradually recovers from the epidemic, the demand for cotton begins to increase. In addition, the escalating conflict between Russia and Ukraine has stimulated the sharp rise of agricultural product prices. In addition, the short-term closing of Meimian 05 contract was also superimposed.

2024: Phased rise breakthrough. Before the Spring Festival, due to the good order in Southeast Asia, the export of American cotton was strong, and the quantity of warehouse receipts was low, The high level of on call led to the short-term closing of the 05 contract, ICE hit 100 cents/lb.

　 Summary:

About the low point: American cotton fell below 60 cents/pound in 2008 and 2020, which was also boosted by the black swan event at the macro level, pushing the price to the extreme.

About the high point: for American cotton, the extreme shortage of global cotton supply will lead to extremely low warehouse orders The on call is extremely high, and it is easy for the contract in 2005 to have an extreme situation of closing positions.

On the whole, for American cotton, 60-90 cents/pound is a regular fluctuation range, and 70-75 cents/pound is already in the planting cost range of American cotton, which is an undervalued range under normal circumstances.