Low Demand To Stimulate Cotton Prices In The Coming Year Bullish

On the one hand, the progress of the new cotton listing has accelerated a lot, and the inner cotton pportation of Xinjiang cotton has been relatively smooth. The situation of supply shortage has improved significantly. On the other hand, the purchase price of new cotton has been gradually reduced, and the market mentality is pessimistic.

A big factory in Shandong has sharply reduced its purchase price to the factory, which has a very obvious negative impact on the market.

It should be said that the recent fall in the market is reasonable, but I am not pessimistic about the market in the coming year.

Since April of this year, the price of cotton and cotton yarn has been narrowed obviously at home and abroad, resulting in a marked decline in imported cotton and imported cotton yarn.

In terms of imports, the import data of cotton and cotton yarns this year and previous year have dropped markedly since May.

The most direct response to the spread of cotton yarn imports has been maintained at around 150 thousand tons since May. From 5 to August, the total import volume decreased by 120 thousand tons compared with the same period last year. In the 8 months from last September to April this year, the total import volume increased by 200 thousand tons compared with the previous year.

The narrowing of the cotton price difference will enhance the competitiveness of domestic cotton yarn.

By counting the receipt of price difference in previous years, if the current spot price difference is used, it is estimated that the import of cotton yarn may fall to 1 million 800 thousand tons (at present 150 thousand tons per month).

If the price is predicted according to the futures market, it may fall back to 1 million 300 thousand tons.

Assuming an intermediate value, assuming 1 million 500 thousand tons of cotton yarn imports, then our domestic demand may be 8 million 300 thousand tons, an increase of 800 thousand tons compared with last year.

This year, the government's policy intention is very obvious, to control supply as far as possible, to ensure the farmers' new cotton to complete the sale.

The measures adopted are trying to encourage the enterprises to use Xinjiang's new cotton by placing the quotas of 1% tariffs and the new cotton ties, and may no longer issue other forms of imported cotton quasi tax quotas.

In addition, the government also said that the strategy of reserve cotton this year is that after the acquisition and processing of cotton in March of next year is basically over, when the market is in short supply and the price is rising in a certain extent, depending on the sales progress of new cotton, the state will put part of the reserve cotton into the market in accordance with the principle of not pressing the market to meet the needs of the market.

According to USDA11's forecast, China's output is 6 million 530 thousand tons, and its demand is 8 million 160 thousand tons. The adjustment is basically consistent with our expectations.

But overall, the gap is 1 million 630 thousand tons, minus 1% tariff quotas of 900 thousand tons, and a shortfall of 730 thousand tons, which may be met through 40% tariff import, dumping and processing trade quotas.

However, before the sale of new flower sales in China is better, other supply channels are limited by policy.

Therefore, in the early stage, the domestic supply and demand situation will remain good.

Loose monetary policy will ease the plight of real enterprises

Last Friday, the central bank cut interest rates two years after another, pointing to the excessive cost of entity capital.

With the full liberalization of monetary policy, textile enterprises will have two advantages.

First, the cost of capital of enterprises is decreasing. If the central bank is allowed to drop in the future, the situation of tight funds will ease and the pressure of business will be reduced.

Two is the central bank's interest rate cut and the US interest rate hike will be narrowed in the future, or will lead to the depreciation of the RMB, which will have a direct impact on the mainland's textile industry to enhance its international competitiveness.

To sum up, cotton prices remain weak in the near future, and long-term prices will rise.

The main contradiction in the near term market is the pessimistic anticipation of the increase in supply over the next few months and the impact of the 60 cent on the market.

But with the overall easing of monetary policy and the narrowing of the domestic and foreign cotton prices, the domestic demand for cotton will increase in the future. In the case of clear supply, long-term prices will rise again.