Cotton Throwing Store Brings Potential Trading Opportunities

5, June is probably the time window for throwing and storing.

Since October, the market rumors have been put on the stock market in 2018, and the policy of reserve cotton rotation has been postponed.

After entering the March, the market has become more and more concerned about cotton reserves. People in the industry are doubtful about whether the reserve cotton will be out of stock and when it will start to turn out and how much it will turn out in the current year.

In particular, in March 8th, after the news of "the national cotton and cotton public inspection is about to start", the market has become the biggest potential negative in the domestic cotton market.

Under this negative pressure, zhengmian 1905 contracts have remained narrow in the range of 15100 to 15400 yuan / ton for nearly two weeks.

We will analyze the potential impact and potential trading opportunities of dumping and storage on the market from three aspects: the possibility of dumping, the time window for throwing and storing and the possible path of throwing and storing.

How big is the possibility of dumping?

China's cotton production and marketing Inventory (2019.3) released by China cotton information network shows that China's total cotton output is 5 million 720 thousand tons in 2018/2019 and the total demand is 8 million 580 thousand tons.

There is a supply gap of 2 million 860 thousand tons (858-572=286) in this year's production and demand. In general, the gap needs to be replenished by the three parts of last year's carry over inventory, import cotton and reserve cotton.

Table for China's cotton production and consumption stock resources

As of the end of August 2018, domestic carry over inventory was about 2 million 510 thousand tons, and China cotton information network estimated that the import volume was 1 million 760 thousand tons. Assuming that all two parts are available, it can completely make up for the supply gap this year and do not need to store cotton reserves.

But can all domestic carry over stock be used?

Looking back on the relationship between the total domestic cotton inventory and the late price trend in the past 3 years, we can see that the domestic inventory below 3 million tons is more likely to cause prices to go up sharply, and it is difficult to stabilize the price.

At the same time, we noticed that in the past three years, the average stock in China was 3 million tons.

Therefore, we think that 3 million tons for domestic stocks is a very noteworthy data.

The picture shows the trend of domestic stock and futures prices in the past three years.

In the past three years, the carry over inventory at the end of August was 1 million 220 thousand tons, 1 million 710 thousand tons, and 2 million 510 thousand tons respectively. Taking nearly three years average value, we need roughly 1 million 800 thousand tons of carry over stock.

In the inventory of 3 million tons and 1 million 800 thousand tons, we chose a smaller 180 million, that is, at the end of August last year, we could use up to 710 thousand tons (251-180=71) in the carry over stock, and the import volume was 1 million 760 thousand tons according to the forecast data, so that the total amount of carry over stock and import volume could be 2 million 470 thousand tons. Compared with the 2 million 860 thousand year of production demand gap or 390 thousand tons this year, if we want to stabilize the market supply, we still need to throw the reserve action this year.

Time window for throwing and storing

By the end of February 2019, the total inventory of domestic industry and commerce was 5 million 370 thousand tons, and the annual consumption of 8 million 580 thousand tons, that is, 715 thousand tons per month, was 3 million 220 thousand tons at the end of May. At the end of June, the stock was 2 million 510 thousand tons (less than 3 million tons).

We also mentioned in the preceding paragraph that domestic stocks below 3 million tons are more likely to cause cotton prices to go up.

At present, the stock of state reserve cotton has dropped to below 3 million tons, and there has been no task of going to stock.

If cotton prices go up sharply in 5 and June, dumping will be a good tool to stabilize market prices.

Therefore, we expect that 5 and June will probably be the time window for dumping.

Possible path of throwing and storing

There are two ways to throw a reservoir from a large direction.

First, only out.

This situation will suppress the price of cotton this year, and the price will not rise substantially. But at the same time, when the supply and demand contradiction is moved to 2019/2020, there may be a big rise.

Second, edge out.

In this case, the pressure on the price of this year will be smaller than that in the first case. However, the gap between supply and demand in 2019/2020 is still there. Cotton may start the slow bull market and the price will slowly climb.

Next, I combine some rumors on the market to further refine the above two paths.

In 2018, after the end of the dumping and storage, the surplus cotton reserves amounted to about 2 million 700 thousand tons. According to market rumors, the total number of foreign cotton and Xinjiang cotton will be imported into the country this year. The total volume may be 1 million 200 thousand tons. (this year, the state will reserve 300 thousand tons of cotton and 900 thousand tons of Xinjiang cotton).

If so, the total amount of the state can be put into the market this year is 3 million 900 thousand tons (270+120=390). There are three possible ways of putting it into the market.

1.

A simple round of warehouse operations, 300 thousand tons of cotton and 900 thousand tons of new cotton in Xinjiang, and 1 million 200 thousand tons of cotton reserves to the market.

Under such circumstances, the effective supply to the market (net investment) is only 300 thousand tons (120-90=30), which can not make up for the supply gap this year, and is likely to cause the market to rise.

2.

Only 1 million 200 thousand tons of this year's rotation will be left, leaving the previous 2 million 700 thousand tons of cotton reserves out.

In this case, the effective supply to the market (net release) has 1 million 800 thousand tons (270-90=180), which can basically achieve the role of stabilizing the supply and stabilizing the annual price, but there is a potential benefit to the 2019/2020 new year market.

3.

The amount taken is between the preceding two.

The total stock of the State Reserve is 3 million 900 thousand tons. According to the domestic consumption of 715 thousand tons per month, the state reserves 3 months' consumption and can throw 1 million 750 thousand tons.

In this case, the effective supply (net investment) to the market has 850 thousand tons (175-90=85), which can make up for the supply gap this year and stabilize prices.

conclusion

In the third part of the article, how to throw and how much to throw?

Assuming that our first, second point logic is correct, the domestic cotton stocks are large at the moment, and the import window has been in the open state, and will not be thrown in the short term. The possible time window for throwing and storing is 5 and June.

Domestic supply pressure is the biggest in 1 and February, when domestic cotton prices did not fall, can it be speculated that during the period from 3 to June, cotton prices are easy to rise or fall, the bottom of 15000 yuan / ton is basically proved, the space below is limited.

Cotton itself will soon enter the planting season. The weather is a hype point, and the technological form is slowly changing to the trend of multi trend.

Operation suggestion:

1.

In the near future, if the US cotton gets out of the breakthrough market, Zheng cotton will follow suit, but we need to guard against the adjustment brought about by the news.

2.

When the message was dropped, there was a low point to buy the 1909 contract decisively.

As the dumping is carried out, we can compare the parabolic storage path mentioned in the preceding text with different schemes.

If the first path above, the main contract is 1909.

If there are second ways, make the best of 2005 contracts.

If the third path, it is likely to be slow rising bull market, more than a month to hold.