The sharp rise of ZCE cotton on Jun 1 more lies in the bullish expectation in medium to long run

The sharp rise of ZCE cotton on Jun 1 more lies in the bullish expectation in medium to long run. Though 2022/23 Chinese cotton production is high, cotton imports reduce largely year on year, and from demand side, monthly cotton consumption has been constantly above 700kt or even 750kt from Mar, 2023. With the digestion of available cotton stocks, the supply of 2022/23 cotton in the end period of 2022/23 season is supposed to gradually tighten. In terms of the market in 2023/24 season, the weather condition in Xinjiang remains unfavorable from late Apr to late May, and there are still expectations over large reduction of 2023/24 Xinjiang cotton production and harvest-rush of seed cotton in the second half year. On May 21, when Xinjiang suffered bad weather again, ZCE cotton tried to climb up again on May 22-23, but heavy worries have covered on the macro environment and most commodity prices stepped downward on May 22-23, so ZCE cotton failed to increase. During May 24 and May 31, ZCE cotton futures declined following the trend of commodity market. The open interests of ZCE Sep contract dropped by about 100,000 lots during May 24 and May 26. On May 31, after the release of China manufacturing PMI, the bearish sentiment retreats periodically, and bulls enter the market again, and by virtue of the rumors, ZCE cotton futures surge significantly on Jun 1. The bullish expectations for cotton market in medium to long run never change.