【Wdoodoo Weekly Cotton Report】The weather speculation window is fermenting, and Zheng cotton is experiencing more fluctuations

Affected by the hot weather, Zhengzhou cotton opened low and rose high last week. CF09 closed at 16210 yuan/ton, up 465 yuan/ton month on month; National cotton 3128B closed at 17570 yuan/ton, up 450 yuan/ton month on month. August has entered the window of weather speculation, and as the peak consumption season approaches, it is expected that Zhengzhou cotton will rise easily but not fall.

1. Macro support tends to be bullish.

Recently, there has been a slight easing of risk in China and the US non farm payroll unexpectedly turned negative. Expectations of interest rate hikes in September have fallen, and long-term US bond yields have sharply declined, providing more support for commodities;

The policy focus of the Politburo meeting is more inclined to deal with downward pressure, and implementing and making good use of existing policies is still a priority option. If the downward pressure on the economy increases, incremental policies may provide support and protection.

2. Global weather speculation is heating up, and a super strong El Ni ñ o is highly likely to form.

Continued high temperature and heat damage in some areas of Xinjiang, with cotton bolls shedding affecting yield expectations; The drought in the main cotton producing areas of the United States has increased month on month, with 48% of the cotton producing areas in Texas affected by drought, an increase of 4 percentage points on a weekly basis. The excellent growth rate of cotton in the 15 main cotton growing states in the United States is 42%, which is 13 percentage points lower than the same period last year; At present, monsoon rainfall in India is still significantly lower than the same period in previous years, putting pressure on planting area and yield. It is doubtful whether planting can be expanded.

The upward driving force of weather on cotton always exists. NOAA predicts that there is an 81% probability of a super El Ni ñ o occurring from October to December in the past 150 years, and a 97% probability of it continuing until early spring 2027, which may affect cotton production expectations in major producing countries such as India, Australia, and Brazil.

3. The policy of selling inventory continues to exert pressure.

From August 3rd to August 7th, the total sales of reserve cotton reached 40100 tons, with a transaction rate of 100%. The average transaction price was 17014 yuan/ton, a decrease of 87 yuan from last week; The discounted price of 3128 yuan/ton is 17663 yuan/ton, a decrease of 75 yuan/ton from last week; The average price increase is 1497 yuan/ton, a decrease of 66 yuan/ton from last week.

Cotton rotation continues to increase market supply, but 100% transactions indicate resilience in demand. Based on the current daily listing volume of 8000 tons of reserve cotton, a total of 420000 tons have been listed as of September 30th. The reserve cotton wheel effectively supplements the gap of old crops, alleviates the expectation of tight supply-demand balance, and puts pressure on cotton prices.

3. The textile industry continues the off-season atmosphere.

The off-season atmosphere is significant, and demand has not yet started. The yarn utilization rate has rebounded slightly, and inventory has decreased slightly. The start-up rate of embryo fabric continues to decline, and inventory continues to accumulate. The yarn factory intends to stabilize prices and reduce inventory. The increase in cotton yarn prices is lower than that of cotton, and the profit of the yarn factory continues to decline. Therefore, they are maintaining a wait-and-see attitude towards raw material prices. Cotton transactions continue to be sluggish, and the market expects the "Golden September and Silver October" peak season to drive order recovery.

Overall, August has entered a period of weather speculation, with high temperatures and heat damage in some parts of Xinjiang and an increase in drought conditions in Dezhou compared to the previous month. The expectation of global production cuts in the new season continues to exist, and cotton prices are prone to rise but difficult to fall as the peak season approaches. However, the continuous increase in inventory and the sluggish demand in the downstream off-season have suppressed the upward space of cotton prices in recent months due to the drag of low-priced warehouse receipts on contracts. In terms of operation, Zheng Mian will maintain a short-term bullish oscillation of 16000-16500, with a focus on buying long on dips.