China And The United States Resume Economic And Trade Negotiations

In June 29th, the heads of state of China and the United States met in Osaka, and agreed to push forward Sino US relations based on coordination, cooperation and stability and restart economic and trade consultations. The US side said that it would no longer impose new tariffs on China's export products. The trade talks had sent positive signals, and Zheng cotton had rebounded upside down. Combined with the current fundamental considerations, it is believed that Zheng cotton is likely to rise and fall.

China US cotton growing area decreased year by year

The national cotton market monitoring system launched a nationwide special survey on cotton sowing area in mid May. Samples were designed for 15 provinces (autonomous regions), 50 cotton planting counties (cities, farms), and 1895 designated cotton planting information contact households. The survey results showed that in 2019, the total sown area of cotton in China was 47 million 943 thousand mu, a decrease of 308 thousand mu compared with that of the previous year, with a decrease of 0.6%. Among them, the actual sowing area of Xinjiang was 35 million 313 thousand mu, up 2.2% over the same period last year. There are three main reasons for the increase of sowing area in Xinjiang: first, the target price subsidy still has strong attraction for cotton growers. Although 2019 is the last year of the target price of cotton in Xinjiang for three years, the follow-up policy is not yet clear. However, under the protection of the target price subsidy, the cotton planting area in Xinjiang shows a steady and small increase; two, the regiment implements the reform of the regimental field, and each staff assigns about 45 mu of cotton field, which can independently purchase chemical fertilizers, seeds, etc., and the staff enthusiasm for planting is improved. Three, the cost of machine picked cotton is lower than that of manual picking.

According to the report issued by the US Department of agriculture in June 28th, the sown area of US cotton was 13 million 720 thousand acres in 2019, a decrease of 2.7% compared with the same period last year, which is 60 thousand acres lower than that at the end of March. In 2019, the sowing area of upland cotton was 13 million 450 thousand acres, a decrease of 2.9% compared with that of the previous year, and the sowing area of Pima cotton was 275 thousand acres, a decrease of 9.9% compared with the same period last year.

The reduction of cotton planting area in China and the United States has a certain supporting role in the current down price of cotton. From the reduction of cotton planting area in two countries, it is relatively small, especially in China. Although the overall area is decreasing, the area of Xinjiang in the main production area has increased. If the weather is suitable in the future, the output of both countries will increase at the same time, and the total output may not decrease, but it may increase.

New year's cotton reserves are active

The State Grain and material reserve bureau and the Ministry of Finance issued a notice on April 23, 2019 that the reserve cotton rotation will be carried out on the national statutory working days from May 5, 2019 to September 30, 2019. The total arrangement will be about 1 million tons, and a balanced delivery will be implemented. In principle, every working day will be sold for about 10 thousand tons.

In July 2nd, China reserve cotton Management Co., Ltd. plans to sell 12 thousand tons of cotton reserves, and the average price is 13247 yuan / ton, which is 179 yuan / ton less than the previous round, and the price of 3128B is 14468 yuan / ton, which is 172 yuan / ton lower than the previous one. The turnover rate was 100% in July 2nd. As of July 2nd, a total of 437 thousand and 600 tons were planned to go out. The highest price was 15930 yuan / ton, and the lowest price was 11530 yuan / ton. The rotation of cotton reserves and the high turnover rate to a certain extent are bad for the recent months, but they have certain support for the forward contract price.

National cotton industry inventories fell year on year

According to the national cotton market monitoring system sampling survey, as early as the beginning of June, the average cotton inventory used by enterprises was about 32.8 days (including the quantity of cotton imported to Hong Kong), which increased by 0.8 days, down 2.4 days compared with that of the previous year. Projections of the national cotton industry inventory of about 718 thousand tons, an increase of 1.7%, an increase of 10.5% over the same period last year. The cotton industry stock situation is different in the main provinces of the country. The cotton industry inventory in Zhejiang, Shaanxi and Jiangsu provinces is relatively large.

The purchasing intention survey showed that 43.9% of enterprises preparing to purchase cotton in early June were down 20.7 percentage points, down 24 percentage points compared with the same period last year, 42.7% of the wait-and-see attitude, 14.6 percentage points higher than the previous year, up 11.9 percentage points compared to the same period last year, 13.4% of those who did not plan to purchase cotton, and 6.1 percentage points higher than the same month, up 12.1 percentage points over the same period. At the beginning of June, 88.9% of the sampling enterprises planned to stabilize the ratio of cotton to cotton, a decrease of 2.6 percentage points, up 0.7 percentage points compared with the same period last year. 2.5% of the enterprises intend to increase the ratio of cotton to cotton by 2.4 percentage points, down 1.5 percentage points compared with that of the previous year, and 8.6% of the enterprises intend to reduce cotton blending ratio by 5 percentage points, up 0.8 percentage points over the same period.

In short, the current macroeconomic environment has improved and fundamentals have improved. In addition, in the early days of Zheng cotton, there was a sharp rebound in technical indicators.