How Do We View The "Timely Rain" In The 1 Million Ton Cotton Reserve Market?

On the evening of April 23rd, the State Grain and material reserve bureau and the Ministry of finance of People's Republic of China announced that: in order to optimize the structure of central reserve cotton and ensure good quality, in May 5, 2019 -9, 30 months after the plan, we planned to turn out the total amount of cotton reserves, about 1 million tons, and put it into a balanced operation. In principle, we would sell about 10 thousand tons per working day.

At the same time, according to the announcement, according to the situation of the rotation of cotton reserves and the supply and demand of the cotton market, the relevant departments of the state chose to enter the aircraft.

Facing the recent surge of spot cotton prices at home and abroad, many textile enterprises are worried about their hearts. They are worried that the rising prices of raw materials will make them difficult to survive. The market hopes that the cotton can be imported into the market as early as possible.

Good rain knows season, but spring happens.

It is a good day to grow melon seeds and beans, and there is "timely rain" in the domestic cotton market. Is this spring rain "expensive"?

What far-reaching impact will it have on the market?

What is the difference between this "timely rain" and previous years?

First of all, from time to time, the stock of cotton entering the market is relatively late.

For example, the start time of 2017/2018 cotton rotation is March 12, 2018.

Secondly, from a quantitative point of view, the number of stocks of cotton entering the market is relatively small.

For example, in the year of 2017/2018, the rotation of national cotton reserves began in March 12th and ended in September 30th. The total turnover of cotton reserves was 2 million 505 thousand and 900 tons, with a turnover rate of 58.12%.

In September 30, 2018, the sales volume of the reserve cotton wheel was 30037.8829 tons, and the actual turnover was 9824.4605 tons, with a turnover rate of 32.71%.

The average paction price is 14674 yuan / ton (down 169 yuan / ton compared with the previous day), and the 3128 price is 15853 yuan / ton (down 281 yuan / ton compared with the previous day).

Finally, due to the fact that the relevant implementation rules have not yet been published, there are still many other aspects to be estimated.

The impact of central reserve cotton 1 million ton rotation into the market

[Wang Xiaobei, senior analyst of Hongye futures cotton Co., Ltd.]

Simply look, the policy of dumping and storage is short term.

From the current spot market new cotton paction situation, this year's low price upland cotton is favored by the market, the textile enterprises are also waiting for the low price cotton supplement to lower production and low cost.

The deal is expected to be more popular and will boost spot cotton prices.

In addition, from the total amount of cotton reserves, there will be support for cotton prices.

Shanghai chief strategist, Wu FA Xin, Ltd.

"The impact of this throw on the market is neutral and will not cause too much impact on the market."

First, it has long anticipated the dumping and storage market. In March, people in the industry were asking questions: "how can we not announce the news of dumping?

And throw it away? "

Therefore, the throwing and storing is "boots landing and bad cash", so we need not make a fuss.

Two, the amount of 1 million tons is a theoretical "listing amount", and the real daily turnover may be lower than the "listing amount".

That is to say, if 100% pactions are not done every day, the final total may still be less than 1 million tons.

Three, the contents of the bulletin laid the groundwork for "turn in".

It is the focus that we need to focus on in what way and at what price cotton will be imported into the country.

Four, at present, "low grade" cotton is selling fast in the market. This "throw store" just fills this gap, which is very advantageous to the textile mill.

Five, after years of market baptism, the level of regulation and control of the relevant institutions has been greatly improved.

In short, the dumping of storage + quota issuance, downstream textile factory raw materials have been protected, therefore, for the entire industry, the upstream raw material prices stable, conducive to the healthy development of the whole industry.

[China cotton net]

Whether the reserve cotton production can meet the win-win situation of national inventory and small and medium-sized enterprises, mainly depends on downstream consumer demand.

Shandong's main producer of low and medium yarn spinning enterprises said that since the Spring Festival of 2019, the raw material market fluctuated greatly, and the low price cotton was hard to find in the market. The production of cotton yarn products appeared the phenomenon of price upside down. As a member of the small and medium-sized enterprises, the reserve cotton wheel appeared to be a "life-saving straw", and the textile enterprise said it would seize it tightly.

Since April, there has been a downward trend in the price of cotton yarn, and some textile mills have not been able to protect their profits. The reserve cotton wheel has brought hope to small and medium-sized textile enterprises, especially those who plan to purchase low-grade cotton, which is self-evident, not only ensures the smooth operation of the market, but also reduces the risk brought by the fluctuation of cotton prices to the textile enterprises.

The market is expected that after the start of the reserve cotton spinning, textile enterprises will recover sooner or later when the cost of raw materials is reduced and sales are improving.

[hedge researcher Dong Shuzhi, senior cotton expert.

Prior to the release of 800 thousand tons of quasi tax quota information, now the 1 million reserve round, fully protect the domestic cotton supply and reduce the cost competitiveness of the cotton mill, ease the supply and demand tension this year, coupled with the downstream consumption into the off-season, the possibility of future cotton will weaken, the probability of domestic and foreign cotton will be further reduced.

Nevertheless, attention should be paid to future weather changes and supply and demand in India.

[Li Zhenhua, research director of Xinjiang Lihua cotton industry Limited by Share Ltd]

Short term impact on domestic cotton market is small, impact on imported yarn is more direct.

1. from a recent point of view, the downstream performance is very weak. It is understood that to a greater extent, because of the lack of reserve cotton for two months this year, the raw material cost of the whole market is going up, so there is a problem of unreasonable matching of orders.

2. at present, many small and medium-sized enterprises even consider shutting down the problem. In the recent two months, these enterprises should have realized that the reserve bonus is only about two years away. This year, the market mentality of RPG is totally different from that of last year.

3. this year, the total amount of storage will be limited.

It is expected that the overall turnover will be in the first few days, and the rate of return will not be very large. It is estimated that the price difference between the reserve cotton and the new cotton will continue to shrink this year.

4. short term reserve cotton is not as big as the impact on the domestic market, because the supply of cotton is not directly related to the supply of cotton market this year. The main problem is that the market is short of low price and low grade cotton resources this year. The reserve cotton is relatively satisfied with this demand. But for the domestic low grade and low price cotton supply, besides the real estate cotton, the others are basically Xinjiang cotton, and the whole is the state of resource mismatch. If the former low grade cotton spinning enterprises will not buy Xinjiang cotton, then the rear will not actually affect the demand for Xinjiang cotton.

5. even if reserves are still not present, textile mills do not need high-grade cotton to produce in the short term, and even if they stop production, they will not buy high-grade cotton.

Because orders do not match, they are reluctant to buy Xinjiang cotton and increase production costs, so the impact on the domestic market is not straightforward.

On the contrary, the impact on foreign markets is more positive, because for foreign markets, if China is short of medium and low grade cotton, the textile enterprises will stop production, then the yarn they produce will inevitably be filled by imported yarn, at least part of which will be filled by imported yarn, so the short term low grade will be compensated after the rotation is made, so the import of imported yarn is suppressed.

So for the external market, there is pressure in the short term. For the internal market, there will be an iterative effect in the short term supply of cotton resources. There is no big improvement in the price of cotton in the southern Xinjiang, and a large part of the southern Xinjiang has no guarantee.

From this angle and term structure, the whole will not have a particularly big impact, because the futures price falls down, the hedging will enter the spot price, this part is still the cheapest middle and high grade cotton.

6. in regard to the issue of rotation, the announcement has been put forward but not explained in detail, but from the present cotton supply structure, including domestic and domestic supply structure, it must be dominated by foreign countries.

Because there is a round of expectations, the external market will not drop too much, is the early entry of the internal fund is relatively uncertain, because the short term to do more power is basically there, if someone withdraws, the short term will drag the disk.

What opportunities are there for the coming market?

The situation and the supply and demand arrangement of cotton market were filled with hope, and the second round was 1 million tons of cotton reserves, which is much lower than that of nearly 3 million in the past year. This year, the reserve market is "less than enough". Thirdly, according to the feedback from some Treasury, the current reserve resources are mainly low grade real estate cotton, which meets the demand of the market for low-quality cotton, and the early market has basically digested the interest rate, so the impact of this round on the market is limited. Fourthly, the domestic spot cotton prices slowly move upward, and the cost of cotton warehousing, capital interest and other costs gradually increases. Cotton market opportunities or mainly in the following aspects: first, the reserve cotton rotation notice mentioned that the relevant departments of the state will actually turn out according to the cotton reserves.

Finally, the Sino US trade consultation is developing well, and the probability of reaching relevant agreements in the later period is higher. Especially, the market has repeatedly mentioned China or implemented the specific rules for purchasing the US cotton, which has been favorable for the external market and the whole international market, and is also expected to boost domestic cotton prices.

From this point of view, opportunities for future cotton remain, and operators can plan appropriate plans ahead of schedule. At the same time, we must pay close attention to the regulation and control of relevant policies, and timely determine the purchase and sale strategy according to specific conditions.