Cong Cotton Will Remain Silent In The Import Market.

Since the last report released in March 29th, New York cotton has had mixed concerns. As of Thursday (April 12th), the May contract lost only 54 points, closing at 93 cents, while December contract lost 242 points to 88.30 cents.

Although there has been no change in the overall market level in the past few weeks, the biggest story is that the price upside down is widening, with /12 closing at 470 on May and May. Just a month ago, in May 12th, the price difference remained at 179 points, down in May. In May, the /12 price difference swung at 649 points, reflecting two opposite situations between cotton and new cotton this year.

The US Department of agriculture's supply / demand forecast released this week has led to two years. cotton Widening the spread between them. Although the report was seen as bad, because the end of the world inventory was raised by 3 million 750 thousand packs, but the number of cotton related this year is actually quite good. China's imports increased by 2 million packs to 20 million 500 thousand bales, while the US and India exports increased by 400 thousand packs and 1 million 150 thousand packs respectively. At the same time, the output of these two countries has been cut down, the United States has cut 110000 packages, and India has cut 500000 packages. If these forecasts are realized, this year's production demand and supply (excluding China) will still be quite tense.

Global inventory is expected to increase from 50 million 510 thousand bales to 66 million 70 thousand bales this year, a huge increase of 15 million 560 thousand bales. However, when we look at these accumulating stocks carefully, we notice that China is by far the largest stock hoarding country, holding 11 million 480 thousand packs, which means that the global inventory will only increase by 4 million 80 thousand packages. In the two southern hemisphere countries, Brazil and Australia increased by 1 million 300 thousand and 810 thousand packs respectively. In addition, the United States increased 800 thousand packs, followed by an increase of 500 thousand packages in Africa, an increase of 480 thousand in Central Asia, and a relatively small change in other regions. Only India's stock dropped sharply to 1 million 300 thousand bales. The main reason for the decrease in inventory was the revision of the statistics. This month's report will increase the inventory of India by 3 million 250 thousand packs.

Considering the tight inventory last summer, it is hardly a dismal figure to increase 4 million inventories outside China. In addition, although US stocks are expected to increase slightly by the end of July, most of the increase is expected. Cotton inventory The contract has been signed. Similarly in India, India is the second largest cotton hoarding country after China, holding 9 million 550 thousand bales of cotton, but India can not export more cotton in the rest of the year.

It seems that cotton futures will still be well supported from the relatively tight inventory situation this year. In fact, there are still a lot of shorts to be filled. Although the volume of empty disks in May dropped rapidly this week, there were only 38000 hands left by the end of the morning, and many bears refused to withdraw from the market. They rolled their positions into the July contract. The empty volume in May and July is quite large, at 119000 hands or 11 million 900 thousand packs, especially when we consider the sale of cotton in the United States is very small.

The threat of air traffic has eased over the past two weeks as the US export sales have been largely removed. In the past two weeks, net sales dropped nearly 200000 packages, releasing some cotton, and this year's total contracted volume dropped to 11 million 850 thousand. If this unfavorable export sales trend continues, it may trigger the threat of certified stock dumping, especially if recent. Stage cotton The market looks attractive.

As pointed out, we believe that China has the key to the next step in the market. Some analysts believe that China will continue to import cotton. It is said that China will increase its import volume by about 2000000 packets, but we find it hard to believe that China will increase more cotton for its huge inventory. In the first 8 months of this year, from August -3 months, China had imported 15 million 850 thousand bales (statistical weight) of cotton, only contracted, but there were still 2 million 200 thousand packages of American cotton to be shipped. Considering the fact that other cotton producing areas, such as Australia, Brazil or India, have not yet been shipped, we all doubt how much cotton China can buy and stock its cotton income on account of China. We believe that China is more likely to suddenly be silent in the import market. The recent US sales withdrawal may be an early sign of this speculation.

So where do we go from here? In a number of trading days, the short contract will increase the May contract by 5 cents, but the unliquidated contract is reduced, and the US contract is cancelled. We believe that the market rally will not gather more energy. The December contract is to some extent benefit from the current market strength, but unless we see that planting intentions are greatly reduced or weather problems arise, new cotton futures contracts will be difficult to establish a bullish pattern. Soybeans close to $14 / bushel are stealing cotton fields, but global production will be significantly reduced and demand recovery. These factors will prevent inventories from increasing next year. Before we see these evidence, we believe that the rise of the market will lead to some bearish Choice Policies in place.