Close To The Year, The Cotton Market Is Restarting Or Promising.

In 2018-2019, the cotton market was centered on China US trade consultation, downstream inventory and warehouse receipt pressure. Zheng cotton prices also hit a new low of nearly two years. In the past two months, the domestic market maintained a shock in the 12600-13300 quarter, and the market mentality was hit hard. At present, the cotton in the northern hemisphere has all entered the picking period. The domestic cotton picking has been sold at the end of the sale. More than half of the sale has been opened in 2019/2020. Is there any change in the market situation?

From the perspective of global and China's cotton supply and demand (Figure 1, figure two), cotton is still in a loose supply and demand pattern. Although global Australia and Pakistan are in a state of significant reduction, the increase in India and Brazil basically makes up for the global shortfall in production. In addition, China's cotton production is expected to fluctuate little. Although the new cotton market was released in 2019 during the early national day, Xinjiang's news of a significant reduction in production and seed cotton prices rose. But according to the latest market news, in 2019, the average cotton production per unit area in China was 121.9 kg / mu, a decrease of 3.7% over the same period last year, and the total output was expected to be 5 million 843 thousand tons, down 4.3% compared to the same period last year, which affected the market supply and demand pattern smaller. Basically, China and the world have little fluctuation in supply and demand, and the market can operate steadily.

Figure 1 forecast of global cotton production and marketing

Fig. two supply and demand balance map of cotton in China

From the perspective of industrial inventory, the current cotton is in the pressure stage of new cotton concentrate listing and supply, and the price of lint spot is low. The GB 3128 currently offers a price of 13200 yuan / ton, and the center of operation of Zheng cotton fluctuates by 400 points at 12800. Now the reserve cotton wheel is opened and opened, reducing the stock of market circulation. In the medium and long term, there is a market for the base price and a short-term high price. However, looking ahead to the whole year's consumption, there will be a storehouse stage in the future market, and the uplift of the cotton futures price will be stronger. From the perspective of industrial Inventory (Fig. three), the inventory of enterprises is lower than that of last year. Despite the sharp reduction in foreign trade orders in 2018/2019, the cotton yarn output in this year has dropped significantly. But after a year of precipitation, the market basically stabilized internal and external orders (basically lost the US order, and basically set the foreign trade market), and the company is relatively optimistic about cotton in the future.

Fig. three inventory statistics of cotton industry in China

From the downstream point of view, over the years, in January December, due to the end of the year, orders for downstream textile enterprises were generally not very optimistic. The Spring Festival this year is more than 1 months ahead of schedule, but as of now, the downstream cotton yarn prosperity index has been maintained at 28, an increase of 8% over the same period.

Fig. four China's cotton boom index

At present, China's cotton textile industry chain inventory is running high and middle reaches low, but from the perspective of industrial chain conduction, upstream will open the door to inventory, and the middle reaches continue to go to the library next year or will replenishment. Downstream will be stored in the off-season or will go to the warehouse. The conduction of the next year is positive operation, which is conducive to cotton consumption.

But we need to pay attention to the recurrence of the relations between the two countries. At the moment, we have both emotional and price responses. But the 11900 low position of the early Zheng cotton low will no longer break through the US policy. Next, we will pay attention to the impact of the 2020 cotton reserve policy on the market, but we can not consider the impact of the rotation before the end of the cotton spinning (March 31, 2020). The above will inhibit the rising of space and time of Zheng cotton.

To sum up, the current downstream consumption has not been significantly improved and the upward momentum has been blocked. However, the current bear power is also weak, and it will still remain in the 12400-13500 interval before the Spring Festival. In the coming year, consumption is expected to remain flat. The trend of Zheng cotton's rise has been opened, and the current strength of seeing many forces is stronger.