Point Of View: The Worst Market Expectation Is Over. Domestic Cotton Supply Variables Are In Reserve Cotton Policy.

Zheng cotton is currently showing a consolidation pattern, with no obvious driving force up and down.

Domestic cotton demand is weak, but the worst market expectation is over. The main variable of domestic supply is cotton reserve policy. The deviation of domestic import + reserves and possible market volume and market expectation will affect the valuation center of Zheng cotton.

At present, ICE cotton has strong technical support near 70 cents / pound. With the improvement of China's cotton balance table, it is expected that ICE cotton will have a rebound kinetic energy, which will help to ease the impact of imported cotton on domestic cotton market.

Before the relative balance between supply and demand has been broken, the Zheng cotton oscillation interval will be constructed from the point price interval and the hedging interval (15100 - 15600 yuan / ton), and the center of gravity will gradually move upward along with the rising cost of cotton.

The latest data at home and abroad show that the demand for downstream clothing is weak.

Since January, the US cotton export data have been lower than the same period last year. As of March 7th, the US cotton single week export contract signed 42 thousand and 600 tons, representing a decrease of 29 thousand tons compared with the same period last year, indicating that even if the Sino US friction is eased, the global cotton consumption is still affected by the global weak economy.

In March 14th, China released the macro and industrial data in February 2019. Considering the influence of Spring Festival, domestic textile and export sales are still weak.

From the low point of export growth, in the early February of 2016, 2017 and 2019, the export growth rate was low or in February, 2015 and Spring Festival holidays in the middle of the year, and export growth rate was at a low level.

In February 2019, the export of textile and clothing increased by -35.72% on a year-on-year basis, and the growth rate was -47.83%, which was affected by the Spring Festival.

Clothing retail sales grew 1 from a year to 1.8% in February and 7.7% in the same period last year.

The industrial chain is currently in the traditional peak season, and the peak season is generally worse than last year.

The market order for textile enterprises and weaving enterprises is mainly based on the order before the Spring Festival.

There is still no apparent increment in the largest single long list.

Both spinning enterprises and weaving enterprises have problems of not picking up the comprehensive starting rate, which is affected by the shortage of expected orders and the difficulty of recruitment.

Textile enterprises, cotton and woven fabrics appear to go to the warehouse, the overall pressure is gradually released, but the inventory of textile enterprises is still relatively high.

On the whole, domestic cotton textile consumption is in a weak and stable situation.

In the four quarter of last year, when the market was extremely pessimistic, the concentration of consumer sentiment was released. With the gradual implementation of Sino US consultations and the implementation of policies such as lowering taxes and other beneficial entities, the consumption expectation was from downward to relatively flat. In the short term, the worst stage of consumption expectation has passed, but the general direction of demand still needs to be further confirmed or falsified by macro data and industrial chain level.

In the case of a weak consumer expectation pattern, the unknown supply this year mainly lies in the volume of imports and reserves, and it is uncertain whether there will be a reserve cotton rotation. The current domestic supply variables are mainly in the cotton reserve policy.

In 2019, reserve cotton has been postponed, and there has been no news about the time and volume of storage.

The market predicted that the reserves in the 2019 year were 1 million tons (2 million 510 thousand tons last year). The import volume and the estimated reserves in the market will be about 2 million 700 thousand tons in the year. If the domestic import volume + the dumping volume may be deviated from the above value, the expected difference will affect the social stock to sink ratio of the market, and then affect the valuation center of zhengmian. The import volume of cotton this year is underestimated at least 200 thousand tons.

From September 2018 to January 2019, China's cotton imports totaled 880 thousand tons. According to the mainstream balance sheet, it was estimated that China's imports from the external market in China were 1 million 600 thousand to 1 million 700 thousand tons (1 million 320 thousand tons in the corresponding period of 2018/2019). The surplus imports from February 2019 to August were around 800 thousand tons, lower than the 850 thousand tons imported during the corresponding period of 2017/2018. Considering the good progress of Sino US consultations and the gradual liberalization of domestic import restrictions, this situation is not reasonable enough for the year September 2018.

It is expected that the late balance sheet will slightly increase China's cotton imports in 2018/2019.

In the context of possible import increases this year, reserve reserves will affect the end of the year social inventory.

If throwing more than 1 million tons in 2019, there will be more obvious pressure on the disk.

As time goes on, domestic low-cost resources will gradually decrease, capital storage costs will gradually increase, and domestic cotton cost center will gradually rise.