There is talk of cotton: the slow rise of cotton has begun to show

Since late December, cotton has shifted from a strong six-month upward trend to a weak range between 27,000 and 29,000. In recent days, the spot price of cotton has gradually risen, moving from 26,900 yuan/ton to 27,500 yuan/ton, but with only modest daily gains. Meanwhile, cotton yarn prices have shown a slow downward trend, with the C32 index falling from 35,400 to 34,800 yuan/ton and showing signs of stabilization. The balance of power between bulls and bears has led to a sluggish market, with cotton yarn profits dropping from 500 to 500 yuan/ton. As a result, downstream demand has significantly weakened due to high cotton prices. Additionally, the impact of the Khmer price has sparked concerns about potential increases in cotton planting area in the future. Reports suggest that nationwide enthusiasm for cotton cultivation may lead to a rebound in planting area next year. However, in my opinion, despite the surface calm, the cotton market could see new developments in the near future. In terms of planting area, I don’t believe there will be a significant increase. Cotton farming is labor-intensive, and rising wages have driven many young workers away from rural areas. For example, in Henan Province, where Fujitsu has established operations, it’s expected that around 170,000 young laborers will move out next year. With such a loss of workforce, the elderly who remain are unlikely to make major changes in planting scale. Similar situations exist in other provinces as well. Moreover, even if planting area expands, it doesn’t guarantee higher yields—weather conditions remain a key concern. From the perspective of major fund positions, there are clear signs of bargain hunting. As of January 4, 2011, the top ten net positions of the main force increased from 1,454 hands on December 15, 2010, to 9,213 hands, indicating that the main players are entering the market during this consolidation phase. Based on historical patterns, this often signals a potential rally in cotton prices. Looking at supply and demand fundamentals, the tightening of cotton supply is undeniable. According to reports from spot companies, procurement has become more challenging, and inventory levels remain low. According to the U.S. Department of Agriculture’s December supply and demand report, China’s 2011 cotton supply gap still stands at 400,000 tons, although this is less than the 1.2 million tons in 2010. The supply shortage remains, partly due to large-scale cotton imports. Additionally, the influence of the Khmer price on consumption continues to affect the market. Recently, U.S. cotton has seen a stronger rebound than Zhengzhou cotton, with the FC Index briefly surpassing 30,000 and remaining above 29,000 after a recent drop. The pressure from imported cotton inflation still exists, making cotton prices vulnerable to fluctuations. In conclusion, based on these factors, I believe that cotton prices may continue to oscillate upward in the coming period. A good strategy would be to take multiple long positions at discounted levels and sell on rallies. The price trend may become more apparent once textile companies begin to ramp up production after the Spring Festival. Before and after April, we should remain cautious in the bearish market as speculative hype resumes.