Good Afternoon Is Not Far Away From The Cotton Market.

In November 14th, the State Grain and materials Reserve Bureau officially announced that it will rotate some of Xinjiang cotton from December 2nd to March 31, 2020. As time goes on, cotton prices will become a common concern of the market. Below the author combines the industry view, talk about some of my own understanding.

First, it is a good factor to reserve cotton rotation. This is beyond doubt. According to the latest data from the national cotton market monitoring system, the total output of cotton in China is expected to be 5 million 840 thousand tons in 2019, down 4.3% from the same period last year. The gap between supply and demand is more than 2 million 500 thousand tons. In this case, the rotation of reserve cotton is beneficial to the weakening of the market.

Two, the number of cotton reserves in the 2019 year is 500 thousand tons, and the market should not be too optimistic. The announcement shows that this round of entry is the national statutory working day from December 2, 2019 to March 31, 2020. The quantity is 500 thousand tons, and the daily sale is about 7000 tons. For stable market considerations, the 500 thousand tonnes will not have a significant impact on the domestic market.

Three, the 2019/20 market is more favorable, and the industry needs to strengthen confidence. At present, cotton prices have bottomed out, and there is still limited room for further decline. At present, Zheng cotton's main contract has a low level oscillation in the 13000 yuan / ton line, while Xinjiang cotton's spot price sales have improved significantly, and the enthusiasm of cotton textile mills and middlemen replenishment is higher than that before mid November. According to a trading platform statistics, the recent spot price turnover is high, and the low base 2019/20 lint is favored by the mainland textile enterprises and investors. The underlying reason is the low price attraction.

Four, it is the general trend that cotton reserves will enter the market. The potential supply of cotton will decrease this year. According to the monthly supply and demand report of the US Department of agriculture (November 2019), global cotton production was cut down in 2019/20, ending inventory was lowered and Global trade volume increased. Global production is down by nearly 3 million packages, mainly in the US, Pakistan, India and China. Turkey and Turkmenistan fell slightly. All cotton futures stocks are expected to drop by 3 million packages in 2019/20, and the gap between supply and demand will increase.

Five, there is uncertainty in Sino US negotiations, but if agreement is reached, it will bring benefits to cotton. According to market forecasts, if Sino US economic and trade negotiations reach a bilateral agreement at last, China's increase in imports of US cotton will increase ICE futures by 5-15 cents, Zheng cotton will also rise to 13500-14500 yuan / ton, and the inventory surplus of Xinjiang's 50-100 million tons will be sold out. Textile enterprises' cotton stocks are expected to increase to 3-6 months, and cotton, cotton yarn, textile and garment market will usher in a full recovery.

To sum up, storing cotton wheels will be a good market opportunity. Although the market reaction is dull now, the east wind has arrived, and the spring of cotton will not be far away.