Reserve Cotton Rotation And Sino US Relations Clear Before Cotton Price Trend To Maintain Concussion

At the end of July 2019, there was no substantial progress in exchanges between China and the United States, and the cotton market lost an opportunity to rebound. Looking ahead, the supply side is abundant, the demand side is not showing signs of improvement, Sino US relations still have great uncertainties, but there are also many policy expectations. Before the situation changes clearly, cotton will maintain the trend of oscillation.

Cotton prices turn difficult

According to the international market, according to the latest monthly supply and demand report of USDA, the output of main cotton producing areas has increased. In the new year, the global cotton output increased by 1 million 397 thousand tons to 27 million 348 thousand tons compared with the same period last year, and the consumption increased by 536 thousand tons to 26 million 796 thousand tons compared with that of the previous year. The production and consumption decreased to 552 thousand tons, and for the first time in many years, it became positive. This means that the global cotton market has been running out of stock for many years. Based on the current global economic situation, the market is expected to further reduce global consumption in the late USDA. In the new year, the oversupply of global market is clearer.

Domestically, as of the end of July, domestic commercial inventories were 2 million 888 thousand and 100 tons, industrial stocks were 705 thousand and 500 tons, and total inventories were 3 million 593 thousand and 600 tons, an increase of 801 thousand and 600 tons compared with last year. Futures warehouse receipts, the current registered warehouse receipts plus effective forecasts up to 14024, totaling 560 thousand tons, although since late April, warehouse receipts continued to outflow, but is still higher than the same period last year about 1200, and there are still many southern Xinjiang cotton did not sell. Overall, the domestic spot market is still in a very relaxed supply situation. In addition, the global economic growth is weak, and the suppression of the market is self-evident.

The arrival of reserve cotton has always been expected.

In the current year, a total of 682 thousand and 900 tons of cotton reserves were sold, with a turnover rate of 85.15%. Judging from the current situation, it is expected that the turnover will reach more than 900 thousand tons by the end of the rotation. At the beginning of the year, the quantity of cotton reserves at the end of the 2 million 700 thousand tons is about 1 million 800 thousand tons.

Since 2016, the storage speed of national cotton reserves has been very fast, from 11 million 100 thousand tons at the highest time to 2 million tons. Judging from the position of the national policy level this year, cotton reserves within 3 million tons are regarded as safeguards reserve, which has entered the stage of replenishment reserve.

At present, the cotton packing policy has not yet been released. I believe that the main factors are based on the following considerations. If we turn into the reserve cotton, we should first consider the import of imported cotton or Xinjiang cotton. If China and the United States can reach a better agreement, the first choice must be to import imported cotton. If this happens, it will directly increase the price of imported cotton, and at the same time, it will also drive up domestic cotton prices. If China and the United States fail to reach a relevant agreement and consider entering the new territories cotton, there will be several considerations: first, how much is the rotation? This year, we assume that we will throw 1 million tons of cotton reserves into 1 million tons. If we are ready to turn in 1 million tons, will we turn in 1 million tons of Xinjiang cotton in advance, or make preparations for the continuation of Sino US negotiations in the future, and enter 500 thousand tons? When is the next decision? Considering that the price of cotton is relatively low this year, the enthusiasm of the purchase is relatively low, and the price is not expected well, it is necessary to stabilize the purchase price at the right time. Is it a stable expectation before takeover or after the acquisition begins? Again, in what way or price? This is also a difficult decision problem.

In any case, the rotation policy of cotton reserves will directly reduce the supply of global market, and the pressure of excess supply and demand will be significantly relieved.

To sum up, on the one hand, although the supply of international and domestic markets is quite abundant, the possibility of storing cotton wheels is very large, which is more profitable than the cotton market. On the other hand, Sino US trade consultation has great uncertainty, but its negative impact on the market has been fermented for a long time, and the negative effect has been partly reflected. Therefore, the market is likely to maintain an oscillating trend before the entry policy and Sino US relations are clear.