Core Viewpoint - The article discusses the current dynamics in the agricultural commodity market, emphasizing that the apparent "commodity rotation" is driven by macro narratives rather than fundamental changes. The key investment focus should be on identifying whether the main driving force for each commodity is "industrial reality" or "cost inflation" [3]. Group 1: Cotton Market - The cotton market faces a significant contradiction between high domestic prices and weak downstream demand, leading to a tug-of-war situation. Domestic cotton prices are high, but the cotton yarn sector struggles to raise prices, resulting in negative profit margins [4]. - Domestic cotton production has been adjusted downwards, yet the demand remains lackluster, with exports constrained by external factors and only seasonal domestic demand showing slight improvement [4]. - The key support for domestic cotton prices comes from high planting costs and policy support, but this creates a scenario where costs are strong but upward price movement is weak [5]. Group 2: Lumber Market - The lumber market is primarily driven by rising import costs due to geopolitical conflicts, which have increased international oil prices and shipping costs, leading to higher CFR quotes [6]. - However, this is contrasted by weak domestic demand, particularly in the real estate sector, with a notable divergence between northern and southern markets [6]. - Future lumber prices will depend on the interplay between cost expectations and weak demand, with a need to monitor shipping costs closely [6]. Group 3: Sugar Market - The sugar market is currently influenced by energy price dynamics, particularly the rising oil prices that affect ethanol values, which in turn impacts sugar production decisions in Brazil [7]. - There is a significant divergence between international and domestic markets, with external markets trading on energy expectations while domestic markets remain rational due to high domestic sugar supply [7]. - The future direction of sugar prices will hinge on whether high oil prices can effectively translate into higher domestic ethanol prices, thereby impacting sugar production ratios [7]. Group 4: Pulp Market - The pulp market is characterized by weak supply and demand dynamics, with no significant disruptions on the supply side and stable demand from downstream sectors [8]. - Price movements are more influenced by macroeconomic sentiments and related commodities rather than intrinsic supply-demand imbalances [8]. - Future price trends are expected to remain within a range, with upward movements requiring unexpected demand recovery or supply-side disruptions [8]. Group 5: Live Pig Market - The live pig market is undergoing a deep cyclical bottoming process, with prices falling below 10 yuan/kg, marking a ten-year low and leading to significant industry losses [9]. - Despite the current losses, the decline in feed costs has lessened the severity of losses compared to previous years, and there is significant pressure from high inventory levels [9]. - The market outlook is focused on the balance between weak realities and expectations for capacity clearance, with potential for recovery anticipated in later months [10]. Group 6: Egg Market - The egg market is experiencing a "weak-driven fluctuation" with limited trend space for significant price movements, as production capacity is slowly being reduced [11]. - The key to future capacity changes lies in increasing culling rates, with high culling prices encouraging farmers to reduce stock [11]. - The market outlook suggests a focus on structural opportunities as production capacity gradually decreases, although there are potential risks from future culling rates and production increases [12].

Core Insights - The current commodity market is characterized by structural differentiation and accelerated rotation under the backdrop of "universal inflation" [5] - The market dynamics are shifting from policy-driven to supply scarcity and emerging demand-driven factors in 2026 [5][11] - The rotation trend from gold to industrial metals and then to new energy products is expected to deepen in 2026 [7] Market Dynamics - The market has transitioned from a single variety trend to a dual-driven model of "financial attributes and industrial attributes" [5] - In 2025, the market was characterized by commodity rotation and ongoing policy support, but 2026 will see a fundamental shift towards basic demand fulfillment [5][11] - Key commodities like gold and industrial metals are expected to maintain their upward trends, with platinum and tin emerging as new market leaders [5] Rotation Logic - The core drivers of the current commodity market rotation are identified as "monetary easing, industrial upgrading, and emerging demand" [7] - The weakening of the US dollar due to the Federal Reserve's interest rate cuts has activated the financial attributes of precious metals [7] - The rotation path is unique compared to traditional cycles, driven by AI and new energy rather than traditional sectors like real estate and infrastructure [8] Risk Management - The recent extreme market events, such as the over 35% drop in silver prices, have led to high-frequency adjustments in margin requirements, forcing a deleveraging in the market [10] - The adjustments are aimed at correcting risks in extreme market conditions, leading to a more rational pricing environment [10] - Investors are advised to enhance their risk management capabilities and adapt to the new market dynamics [10] Investment Strategy - Investors should follow a rotation strategy of "trend continuation, trend new stars, and low-position digging" [12] - It is recommended to prioritize holding commodities like copper, aluminum, gold, and silver, which have solid fundamentals and strong trend certainty [12] - For those holding high-position speculative assets, strategies should focus on deleveraging and risk control, utilizing futures and options for hedging [12]

1. Report's Industry Investment Rating - The industry is rated as "Overweight", with an expected increase of over 10% compared to the benchmark index in the next 6 - 12 months [38] 2. Core Viewpoints of the Report - The sharp rise of metals after the new year was a result of the resonance between accidental events and "grand narratives", but the market suddenly stopped in late January. The real reason for the decline was the over - crowded narratives and the reflexivity of leverage. After the "passive de - leveraging", the commodity trend continues, but investors should beware of the over - crowded "narrative" trading. It is recommended to focus on low - crowded copper and other commodities [3][4][7] 3. Summary by Relevant Catalogs 3.1. "Sudden Brake" in the Commodity Bull Market - Since the beginning of the year, the overall commodity (Nanhua Commodity Composite Index) has risen by 8.6%, once reaching 11.4%. The biggest gainers were metals, with precious metals and non - ferrous metals rising up to 47.1% and 13.6% respectively. Energy - chemical and black varieties, which were bearish last year, also rose in January, with single - day gains reaching 1.6% and 3.6% respectively. However, the accelerating rally stopped abruptly at the end of January. From January 30th, the Nanhua Composite Index fell 6.7% in two trading days, while the precious metals and non - ferrous metal indexes fell 19.4% and 10% respectively. On the early morning of January 31st, spot gold and silver recorded their largest single - day drops in 40 years and in history respectively [11] 3.2. What Happened in the Extreme Metal Market after the New Year? - Long - term factors supporting the metal market have not changed. Precious metals are driven by monetization attributes, including overseas fiscal expansion, geopolitical premiums, and central bank gold purchases. Non - ferrous metals face a contradiction between technological demand and supply constraints, along with premiums from resource nationalism and strategic reserves. - The accelerating rally of precious metals after the new year was catalyzed by three factors: geopolitical events in Venezuela and Iran at the beginning of the month, the Greenland dispute between the US and Europe and the expectation of "de - dollarization" in Europe in the middle of the month, and the "US dollar credit crisis" caused by Trump's "manipulation of the US dollar" at the end of the month. - For non - ferrous metals, the strategic attributes exposed by geopolitical disputes and the optimistic sentiment in the equity market promoted their rise [13][15][16] 3.3. Should the New Fed Chairman Nominee "Take the Blame"? - The accelerating rally in the metal market stopped on January 29th. The market attributed the decline to the hawkish new Fed nominee, fearing a "Fed pivot". However, the "Wash trading" had already occurred two weeks before, and the market gave a "deep V rebound" pricing at that time. So the new nominee may just be a visible shock [17][18] 3.4. The Real Reason for the Decline is the "Reflexivity" of Leverage and Narration - Silver became the "eye of the storm" for all asset prices. There were three main risks: continuous outflows of ETF funds while silver prices hit new highs, increasing "de - leveraging" measures by regulators, and the end of the short - squeeze as indicated by the significant decline in the silver lease rate. The departure of long - position funds led to the limit - down of the domestic silver main contract on January 31st [21][22][26] 3.5. The Trend is Not Over, but Beware of the "Narrative" Crowding - The market is overly obsessed with grand narratives, and the over - crowded narratives are the main cause of the price decline. The "Fed pivot" narrative is not valid, and the "commodity rotation" narrative also needs to be re - examined. - After the "passive de - leveraging", prices return to their intrinsic values. It is recommended to focus on low - crowded copper. As of February 3rd, industrial products have generally recovered to 97% of their highest prices, with copper having the fastest recovery rate among metals. Short - term attention can be paid to strong non - ferrous varieties and Chinese commodities boosted by capital flight to safety, and real - estate chain commodities can be used for short - term trading [29][32][35]

Report Summary 1) Report Industry Investment Rating No information provided. 2) Core View of the Report The report points out that there is a risk of a swing in policy expectations both at home and abroad. Geopolitical tensions are intensifying, and global instability will be the norm. The supply - side risks of commodities and loose monetary policies are decisive factors for rising commodity prices. It also mentions bifurcations in domestic and overseas economic outlooks and suggests investment strategies for different asset classes [1][2][3]. 3) Summary by Relevant Catalogs Market Analysis - **Macro**: There is a risk of a swing in policy expectations after domestic important meetings and the Fed's stance adjustment. Attention should be paid to specific domestic policies and Trump's Fed chair candidate. Geopolitical tensions during the New Year holiday may lead to supply - side risks for commodities and support price increases [1]. - **Meso**: There is a divergence in domestic and overseas economic outlooks. The Central Economic Work Conference emphasized consumption promotion and "anti - involution." Trade supported the December economic outlook, with consumption leading the industry recovery, and the persistence of new orders' resilience needs attention [2]. - **Micro**: Focus on high - certainty sectors such as non - ferrous metals and precious metals, and also look for opportunities in low - valued commodity price hikes. For non - ferrous metals, aluminum is a preferred choice. Energy prices are affected by geopolitical events and future supply expectations. In the chemical sector, the "anti - involution" space of some varieties is worth noting. For agricultural products, weather and short - term pig diseases should be monitored. For precious metals, consider buying on dips [3]. Strategy - **Commodities and Stock Index Futures**: Allocate more on dips for stock indices, precious metals, and non - ferrous metals [4]. Economic Heat Maps - **US Economic Heat Map**: In 2025, different economic indicators showed various trends. Consumption contributed 66.8% to GDP, investment 26.1%, and fiscal 20.3%. Indicators such as GDP growth, employment, inflation, and consumption had their own fluctuations [7]. - **European Economic Heat Map**: In 2025, GDP growth, industrial confidence, investment, employment, consumption, inflation, trade, and credit indicators all had different trends. For example, the inflation rate was around 2% - 2.5% [8]. - **Chinese Economic Heat Map**: In 2025, net exports contributed 30.3% to GDP, investment 25.2%, and consumption 44.5%. GDP growth, investment in different sectors, consumption, inflation, and financial indicators showed their own characteristics. For instance, the real estate investment growth rate was negative [9].