New Crown Epidemic Weakened Cotton Prices Return To Fundamentals

In the process of global commodity price trend leading by the new crown pneumonia epidemic, the role of commodity fundamentals dominating price fluctuations has been weakened. Cotton prices have followed a wide range of fluctuations in market sentiment. Recent positive news has brought people a glimpse of the value of price return.

Crude oil goes out of the bottom. Judging from the trend of US crude oil, crude oil prices rebounded slightly in the early stage after breaking through 20 US dollars / barrel. At present, it has risen to 27 US dollars / barrel. Whether the oil producing countries can reach a reduction agreement is crucial whether or not they go out of the bottom. At present, Saudi Arabia and Russia are still confused about the crude oil production reduction. The two sides' "war of words" has not ceased. The intervention of the US seems to make the outside world see that the possibility of the two sides returning to the negotiating table is increasing. The trend of crude oil futures confirms this. After all, oil is cheaper than water. The price of oil producing countries can not be sustained for a long time.

The effectiveness of the global new crown epidemic control is beginning to show. The WHO released the seventy-seventh phase of the new crown pneumonia epidemic report. As of April 6th, 10 hours in Central European time (16 hours in Beijing time 6), 1210956 confirmed cases of new crown pneumonia were found in the world, an increase of 77200 cases compared with the previous day. Although the number of confirmed cases is still increasing rapidly, the experts predict that with the increase of detection efforts in Europe and America, the "backwater barrier" to be detected before being excluded, the number of new crown cases is expected to appear soon (within a week), and US stocks and commodities have rebounded sharply during the Qingming period. Whether the potential epidemic situation in India and Africa can be controlled is crucial and needs constant attention.

China's epidemic has peaked during the Spring Festival, and commodity prices have dropped to the lowest level since the end of the festival. Commodity prices began to pick up slightly as the epidemic eased gradually. Once the global epidemic is inflection point, commodity prices may come out of the bottom. Of course, the bottom of the price now depends on the ultimate impact of the epidemic on the global economy. If the epidemic continues to ferment the economy, then the rebound is temporary and there is room for further exploration for cotton. After all, the export data of spinning and weaving service will be even worse from 4 to May. If the bottom of demand will lead to the lowest price, we should pay more attention to other factors.

Commodity prices are reviewed in a leading position. After this epidemic, domestic and foreign commodity prices are at the lowest level in history, and some are at the bottom of history. In any case, commodity prices are far below their value level, and cotton is no exception. The author has made statistics in the previous article. In the two market bottoming process in 2008 and 2016, only cotton prices were lower than production costs in 2016, and then there were "U" and "V" reversals respectively. This time cotton price has been far below the cost line, and the drop is greater than 2016, which is caused by the resonance effect of the spread of the epidemic and the drop in the price of crude oil, and people's emotions also played a role in fueling. In the future, as the number of global epidemic growth tends to slow down and gradually be controlled, the fundamental changes in market supply and demand will re lead the trend of cotton prices.