Expectations for Cotton to Improve in the Future Due to Reduced Production, Weather and Harvesting Issues in Xinjiang

In early trading, the main cotton futures contract showed a strong trend, rising more than 2%. According to research by Guotai Anxin Futures, last week’s cotton prices fluctuated higher as the US Department of Agriculture significantly increased consumption in its May report, providing support for prices. The annual sales of old US cotton exceeded expectations, and the US cotton balance sheet is in a relatively tight state. Macroscopically, there are also positive signals regarding the US debt ceiling issue. Recently, Xinjiang is expected to experience a second wave of rainfall, with a larger coverage area than the first time. Some areas may be affected by strong winds, sandstorms, etc., which could affect the emergence of cotton and once again attract market attention. Last week, cotton transactions weakened, and demand still faces the test of the off-season. However, fortunately, cotton yarn and grey cloth inventories remain low. Due to reduced production in Xinjiang, weather problems, and harvesting issues, the future outlook for cotton is positive, and Zheng cotton continues to show a pattern of weak reality and strong expectations. For now, it is recommended to adopt a wait-and-see approach in terms of operations.