Supply Shortage Supports Market &Nbsp; Cotton Price Or Maintain Current Level.

This week (to August 19th) New York Stage cotton In December, the contract rose 59 points to 84.14 cents, while the March contract rose 74 points to 82.51 cents.

Although the market is technically overbought and needs to be adjusted, the market refused to retreat this week, and its performance is still quite impressive. The market is approaching 84 cents a few days, so the market should reduce the overbought pressure to a certain extent, though the market is still at a higher level.

Compared with last week, volume fell to less than half of last week. In the last four trading days, the highest single day turnover was only 13 '186 hands. However, the number of open positions increased steadily to 210 '295 contracts this morning, increasing by 52000 since July 20th. Hedge funds are squeezed into long camps. Trade is busy hedging spot purchases, or selling through short selling cotton.

If we observe the latest commodity futures The report of the Trade Commission, including options, we will notice that speculative bull and trade shorts have increased by a large volume. Between July 20th -8 and 10, trade increased 46000 net short contracts to 12 million 800 thousand bales of cotton. Since this report has not yet covered the locations of the recent trading days, we estimate that there are about 15 million packages of net short positions in trade today, of which the index and hedge funds hold relatively net long positions.

Today's US export sales report is favorable, and the number of sales reports has increased dramatically, all of which provide support for the bull market, hoping that the expected adjustment market will become smaller and smaller. Last week, the US upland cotton and Pima cotton export increased 461 "900 packages", so the total number of consignments in the market increased to 6 million 400 thousand in the year. Less than 500 thousand packages were shipped. Sales are fast enough to accelerate the shortage of existing supply channels. Textile mills seem to be planning to order cotton in the first and two quarters, because they worry that if they wait too long, they will have difficulty buying high quality cotton and determining the delivery date.

Textile mills are fighting for Source of supply At that time, they did not want to lock in prices, so they continued to buy the goods that were not priced. Last week, the number of non priced sales increased by an astonishing net increase of 838, or 600 packages, to 8 million 800 thousand packs. The growth is so large that it benefits the market in two ways. First, it shows that the sale of cotton in the US and foreign countries exceeded 1 million packages last week. Besides those unpriced sales, there are still some fixed price sales, such as China, which China did not like to purchase unpriced sources in the past. Second, the increase in the number of sales not being priced means more demand for release and support for the market. Because of such a huge sale site to curb a major adjustment in the market, textile mills themselves disrupted their own purposes. At present, if the market wants to break through layers of support, a considerable external market factor is needed.

Despite the tight stock and the expected production gap this year, the bullish market will continue. We need to pay attention to those factors that may damage the bullish situation. The most likely reason to disrupt the bullish market is the deepening recession in the US and Europe, resulting in an unexpected drop in consumption.

Recent news in the US is not encouraging. The housing market is weakening again, and there is no sign of recovery in employment. Many American consumers are nervous about cash, and the tax increases in 2011 will affect the level of income at all levels, so disposable cash will continue to decrease. Most Americans do not seem to know how much tax increases, but we believe that consumer spending will shrink dramatically next year. As European consumers have to tighten their belts due to tightening policies, we may see an abhorrent drop in GDP in 2011. It remains to be seen whether Asia will once again make up for the weakness of the western economy.

So where are we going to go? As long as the cotton in the northern hemisphere has not yet entered the market, we expect that the cotton market will not face any major pressure. The shortage of existing goods, the continuous purchase of textile mills, and the large number of unpriced sales are all providing huge support to the market. The question is whether the market will remain in the recent trading range, or whether we see the market approaching 90 cents or breaking 90 cents. If the weather matches, the market may maintain an interval shock. However, if the output decreases, it may activate the short back compensation market and further push up the price. Therefore, the current abnormal temperature of the sea level gives us some concern, that is, the temperature in the Pacific is low and the temperature in the Atlantic is high, which may lead to extreme weather in the cotton picking season.

Once new cotton enters the market, we need to re examine the supply and demand situation, but we are likely to see that the price of the whole year is maintained at the recent level.