Downstream Cotton Yarn Has Gone Ahead And Cotton Bullish Sentiment Is Getting Stronger.

Downstream cotton yarn ahead of the walk, cotton bullish sentiment is more and more concentrated, in fact, the upward driving factor is not more than downwards, but the short-term driving force is strong and weak, the key lies in causing the rise and fall of the marginal asymmetry, at present, there is a phased test to break through the market.

Inventory and price

Recently, cotton and cotton yarn spot prices have a reverse trend. Under the current generally accepted consumption led market, cotton yarn prices are weakening and finished goods inventory is rising. But the market players are getting stronger and stronger about cotton futures and cash. Is reality contrary to expectations?

First of all, we need to explain why cotton yarn will present the current inventory and price status.

The traditional cotton yarn market has been slightly lighter after the Qingming period, and then lighter after May 1. This year's cotton yarn market is actually in line with the traditional cycle, but this year there is a lack of long orders. Before the Qingming period, the individual varieties began to weaken slightly one week or so.

In addition to the cycle, the final reason is mentioned a few years ago. Traders and grey goods factories have dropped the cotton yarn inventory compared to the same period. The whole industry chain has maintained relatively low inventory, so even if 2019 has been restored, the order volume since the new year is still less than that of the same period last year.

At the same time, there is no capacity pfer plan or most of the spinning enterprises that are not able to make ends meet, but most of them remain normal.

Comprehensive downstream market, textile sector began to enter the off-season.

However, the inventory of cotton stocks has been in the standing stock level, but the reserve cotton wheel has been postponed for at least 2 months at the time of announcement, and the stock is relatively low in the same period.

It is precisely because of the normal start-up of textile enterprises in recent months, so the purchase amount of new cotton is obviously larger than that of the previous three years. The actual monthly cotton consumption will no longer be significantly reduced, so the short term consumption side profit drive power is weak, and cotton is running the supply side logic.

Of course, if the upstream and downstream prices continue to deviate, then the cotton mill will also gradually turn on or turn to produce competing goods. Then, under the background of the loosely integrated cotton supply, cotton prices will follow the trend of yarn.

So, under what circumstances will the yarn market get better? First, the downstream orders are really improving or entering the peak season, but the textile industry is out of season after 2-3 months. Second, the price of cotton is strong enough to change the structure of supply and demand and stimulate the increase of speculative stocks in all sectors. This situation is feasible in the short run, but it will consume long dated orders, and it will not be sustainable for a long time. Third, policy guidance or technological change is not much.

Driving logic and time opportunity

Above all, cotton can now talk about supply side logic.

This year's cotton inventory structure, the ginning factory and traders are in protest. The main logic of cotton is still on the stock structure, and both the cost and the support cost are equal.

Specific explanation:

In this year, the sales progress of the ginning factory is slow, and traders are also stocking up in strict accordance with the package plan, resulting in the equal amount of resources of one price and point price. This inventory structure results in the support of one price cost under the futures price. The overfall will accelerate the consumption of the point price resources, the increase of the base price and the spot preference of the spot bulls. (because they can not buy such a cheap spot), the entry of the spot empty spot and the spot bulls will form the "South Xinjiang cotton cost support" effect, and the support line will be attached to the capital and the storage cost will increase.

At the same time, after the three time in December 2018, the 15000 time of the 15000 exploration of the spot price resources provided a good opportunity for the paction. It was only 15600 times until now, which made it difficult for the high cost South Xinjiang cotton to keep the risk free hedging.

However, there is still a demand for hedging in 15500+ because of the fact that there is no warranty.

Why can the ceiling lift slower than the lower limit?

This is the result of the change in quality structure.

The most important contribution to quality structure change is dumping and storage delay.

In the first 3-9 years of the month, during the dumping period, the cotton auction volume was approximately half of that of the current period. The average price of the 3128 index and the average price of throwing and storing were approximate to the real cotton price during the first two years. It can be seen that the real cost of cotton and the 3128 index difference between the spinning enterprises in the period of throwing and storing were 600-700 yuan / ton, and the storage price was postponed in 2019, that is to say, the price of domestic cotton is basically close to the price of new cotton.

Cotton spinning enterprises in reserve cotton make more than 32S yarns. This is exactly the mainstream of imported cotton yarn in Vietnam, India and Pakistan. The actual role of China's cotton reserves is not only to supplement the domestic cotton gap, but also to block the import yarn from occupying the share of the domestic yarn.

China's 2019 throw storage postponed. Originally used cotton reserves factories had to start using real estate cotton, low price imported cotton and low price Xinjiang cotton to replenish inventory, resulting in the difference of cotton prices between domestic cotton and imported cotton at high and low grades. After the new year, the low grade cotton increased more than the high-grade ones.

The cotton price convergence of high and low grade cotton is not only delayed by China, but also has seasonal impact.

Due to the Sino US trade war in 2018, the United States and Canada increased tariffs and issued a large number of quotas, which resulted in China's increasing imports of cotton, especially cotton and Brazil cotton. The only potential supply in India was cotton in India in 3-5. The cotton price rose rapidly after China's buying drive in recent years. At that time, import yarn also began to pull up under the drive of high profit, which promoted the increase of US cotton purchase orders to a certain extent.

With the price of cotton and yarn rising, the driving force of Chinese buying to ICE was very weak until the end of March and early April. However, India continued to lower production and lower available stocks of international cotton. That is to say, the gap in the international market itself was driving significantly, and continued to push up cotton prices in ICE cotton and India.

The above two structural problems moved into the late stage of the 5-9 hedge market, and the short term warehouse receipt delivery pressure reduced or even disappeared. It started to cause strong market sentiment, which is the result of the change of time structure.

Zheng cotton main 09 contract 15500-15800 interval hedging short, speculative long shift positions, the bottom of a multi storehouse warehouse solid, if there are new shorts, the price at 05 15500+, 09 15900~16000+, so this interval is relatively safe, speculative long will not easily leave.

Therefore, the cost support is still strong, the probability of speculative bull trading is small, the 5-9 shift has been completed, and the 09 contract delivery is still 5 months old. The main price of the new hedging is 16000+.

Futures have a marginal drop.

And the room for raising the imagination is very large (throwing storage and issuance quota are seesaw effect, can not be haste to determine its short and short term driving force), throw storage postponed, Sino US negotiations for the good market for terminal consumption improvement and storage expectations are always there, but just do nothing, at least has guaranteed that cotton consumption is no longer expected to continue to deteriorate.

At the same time, traders' speculative stocks and factory raw materials inventories still maintain relatively low standing level, which also leads to stronger driving than driving down.

Summary

In summary, the current cotton and cotton yarn prices go against the trend, but the consumption end is gradually falling into a passive position. While the internal and external cotton is driven by the three structure of inventory, quality and time at the same time, the trend is synergy. Of course, cotton prices can not continue to rise under the condition of not following the downstream. And 16000+ also has the demand for cotton protection in the southern Xinjiang. It is inevitable that there will be a continuous callback. However, in the early 4 months of 4, it is a good time to test the opportunity to pull up.

Then the trend will depend on the price change fundamentals to stimulate speculative stock demand and lead the industrial chain to rise, or the factory profits will be damaged, so that the output will be switched off and the start-up will be stopped to speed up cotton prices.

This logic weakens the interference of policy uncertainty. From a comprehensive perspective, cotton is a trend of slow cattle.