Observation: Is 2018/19 Global Cotton Supply Really Tight?

For 2018/19 Global

At present, speculators, cotton trading enterprises, ginning plants and even cotton farmers are almost one-sided, and especially high quality, high-grade and three silk machine cotton are more concerned and favored by cotton mills and cotton enterprises (mainly cotton, cotton, Brazil cotton and Uzbekistan cotton).

Even since July 6, 2018, China has imposed a 25% tariff on imports of US cotton and has not yet blocked the signing of 2018/19 cotton export.

According to USDA statistics, by the end of August 9th, 2018/19 cotton signed 1 million 887 thousand and 600 tons, representing an increase of 35.8% over the same period last year.

Judging from feedback from some international cotton traders and importers, Brazil cotton has been "popular" in China, Vietnam, Indonesia, India and other countries in the past 2018 years, and has signed and exported more vigorously. 2017/18 cotton mill and export enterprises have been very few in stock. Only some international cotton traders and importers are still attracting high-quality buyers of high quality Australian cotton.

USDA, ICAC and some investment institutions generally recognized that the decline in cotton supply and consumption growth in 2018/19 will result in pressure and cotton prices rising.

Although the author believes that the ICE main contract is unlikely to fall below the 80 strong pressure level, the disk is expected to rely on 80 to start a stage rebound. The long line is expected to return to 88 and 90 and so on. But it is not the basic demand of cotton supply and demand. Instead, it is a pullback in the US dollar index, the commodity market is in a bull market channel (especially the rise in agricultural products), the policy changes and the Sino US trade consultation and other external advantages. 2018/19's annual global shortage of cotton demand is either a "false proposition" or a multi point hype, for the following reasons:

First, the statistics of the Ministry of agriculture of India, as of August 9th

The total acreage reached 11 million 260 thousand hectares, only 45 hectares less than the same period last year, a decrease of 3.8%, which is significantly lower than the previous year's forecast of the decrease of 14%-15% by some institutions (even some institutions think that the reduction will reach 20% or so). And from the survey point of view, this year's cotton pests in India are weaker than that in 2017/18, and the yield per unit area is expected to increase, so 2018/19 India.

The total output is not less than 6 million 200 thousand tons in 2017/18.

The cotton planting intentions survey released by USDA in March showed that the cotton planting area in 2018/19 was 13 million 469 thousand acres, an increase of 6.8% over the previous year. In June, the cotton coverage area released by USDA showed that the planting area of the United States cotton in the 2018/19 year was 13 million 518 thousand acres, an increase of 7.2% compared with the current year. From the difference between March and June data, the cotton planting area increased by about 7% in the year of 2018/19, which was announced by the US Department of Agriculture recently.

According to the rate of bud emergence, Bolling schedule and boll opening schedule, it is basically the same as 2017/18 year, so the growth of US cotton output in 2018/19 is expected.

Thirdly, China's cotton output in 2018/19 is still expected to reach the level of the previous year. Entering 7 and August, the weather and accumulated temperature of Xinjiang cotton area will be stronger than before, and cotton will enter the fast growing period. Not only will the listing period not be postponed, but the yield will be flat or small increase; in addition, in 2018, the increase in the area of machine picked cotton in North Xinjiang is larger and the unit yield is expected to be better. Therefore, the industry estimates that the output of Xinjiang cotton in 2018/19 will be no less than 5 million 50 thousand tons (5 million 1 thousand and 800 tons of Xinjiang cotton cumulative inspection in 2017/18).

Finally, cotton production in Africa (mainly West Africa) and Brazil showed a substantial increase in the year 2018/19, which could make up for the decline in supply of cotton growing areas in India, Pakistan and Central Asian countries.

The US dollar index is strong, including China, Vietnam, India, Turkey and so on, all currencies have depreciated sharply. The cost of importing cotton, cotton, cotton and West African cotton has increased rapidly. Cotton mills and traders can only reduce or suspend imports of foreign cotton customs clearance, and the international cotton mobility is weakened.

Taking into account the Fed's moves to raise interest rates, reduce the scale and sanctions against Iraq, and launch a trade war against China, the US dollar is hard to change in the short term. Some agencies even predict that the US dollar index will be 98 or 100, which is very obvious for the global cotton flow and consumption.

Second, the growth of cotton consumption in Southeast Asian countries should not be overestimated, and cotton yarn production and marketing in 2018/19 are very variable.

From the survey, influenced by many factors, such as MSP's sharp rise, insect damage and rupee depreciation, India's domestic cotton price or "high opening and high walking" will be faced with double tests of raw material costs and the shrinking demand for cotton yarn in China and Bangladesh and the double test of "belly to shoulder". At a certain stage, the possibility of price inversion will not be ruled out. With the expansion of the depreciation of RMB and the enhancement of competitiveness of domestic yarn, the import of cotton yarn from Chinese enterprises to Vietnam, Indonesia and Pakistan will also fall at a high level, and the difficulty of Southeast Asian cotton yarn entering the Chinese market will rise. "2018/19"