Regarding the reasons for the rise in cotton prices

Regarding the reasons for the rise in cotton prices, various institutions immediately gave different interpretations. Common reasons are: 1. cotton commercial inventory is lower than expected; 2. cotton production of 2023/24 crop year will decline; 3. the demand for cotton is acceptable, and there are worries over supply shortage; 4.even some suspicious rumors of procurement by large-sized plants have been cited as reason. The fourth point mentioned above does exist objectively to a certain extent, but it is not enough to explain why there was a concentrated outbreak yesterday, let alone why there was a plummet of about 1,000yuan/mt last week. At the same time, this explanation also lacks research on market entities. Yesterday, ZCE major cotton contract opened more than 1.5 million lots. Which participants are conducting such a large number of transactions is also very critical information. We still believe that the reason for the soaring cotton futures yesterday is still under investigation, but we still need to pay attention to the significant changes in any case. Generally speaking, huge positions will be matched with relatively strong bullish expectations. Market players are likely to be based on their own judgments and have higher expectations for cotton, so they will not hesitate to take long positions above 16,300yuan/mt on large quantity. At present, when the reasons are unknown and even more unfalsifiable, these participants are likely to push up the price further. At the same time, the good fundamentals of cotton in the medium term do provide a hotbed for a good mid-term trend.