At the end of February, Zhengzhou cotton was depressed by many factors, such as the decline of domestic and foreign stock markets and the slow progress of cotton textile enterprises' resumption of production. The main contract price hit a new low of 12,105RMB/ton since late May 2016. Despite the strong growth of spot price transactions of cotton in March, the restart of new Xinjiang cotton rotation and the continued interest rate cut by the central bank in March, Zhengzhou cotton rebounded sharply. However, in terms of the rebound strength, some institutions and cotton related enterprises believe that Zhengzhou cotton's rise still needs time for space. At present, the conditions for sharp rebound and even reversal are not mature.

Why does short-term Zhengzhou cotton rebound weak? The author sums up the following points:

First, the spread of the COVID-19 from South Korea and Japan to the Middle East, Europe and the United States has increased the impact on the global economy, and China's textile and clothing exports may encounter ‘cold in the late spring’. From the survey, the current Chinese epidemic situation is turning point, the recovery rate of large and medium-sized textile enterprises has been improved rapidly, but the shortage of orders has become the biggest obstacle to the warmer market of cotton, cotton yarn and grey cloth (especially in Europe and the United States, where export orders are not good).

Second, affected by domestic epidemic prevention and control, poor logistics and restrictions on personnel flow, cotton procurement was lower than expected. As of the first ten days of March, although the recovery rate of large textile enterprises is high, the recovery rate of production capacity is only 50-60%, while the recovery rate of small textile and clothing enterprises is less than 30%, the recovery rate is lower, so the plan for replenishment of cotton and other raw materials continues to be postponed.

Third, the domestic cotton supply is sufficient in 2019/20. According to statistics of cotton logistics branch of China Cotton Association, by the end of January, the total turnover inventory of cotton in China was about 4.4869 million tons (excluding reserve and Zhengzhou futures warehouse receipts), which was higher than 123,400 tons in the same period last year, of which the turnover inventory of commodity cotton in 43 warehouses in Xinjiang was 3.8551 million tons, only lower than 81,000 tons in the same period last year. Considering that the cotton in and out of the warehouse, transaction and transportation are in a semi stagnant state in February, it is estimated that by the end of February, the national turnover stock of commodity cotton is not less than 4.2 million tons.

Fourth, with the rebound of CF2005 contract to more than 12,500 RMB/ton, Zhengzhou cotton warehouse receipt and effective forecast still remains high, amounting to 1.672 million tons of cotton. With the rebound of Zhengzhou cotton, the enthusiasm of processing enterprises and traders for delivery and storage decreased, and the hedging and risk aversion continued to heat up.

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