Cotton Market: Demand Supermarket Is Expected To Be The Core Cause Of Price Rise.

This year, the market is in a pessimistic view of the macro economy, and there has been a marked decline in the first half of the commodity market.

But the macro in recent months

Stabilizing and rebounding shows the tenacity of the real economy and stronger demand for commodities. So we see that as long as the supply side is not too profitable, the trend of this year is relatively strong.

Market pessimism of demand has also been affecting the Zhengzhou cotton market. When we look at the trend of cotton in recent years, we will find that the overly pessimistic demand for cotton leads to overfall of cotton, and once demand is released, the price will rise suddenly.

For example, in the first half of 2014 and 2015, including the first half of 2016, many people expected the domestic cotton demand to be calculated by about 6000000 tons. Then the production and operation arrangements were made with such data, resulting in the continuous compression of social inventories. Finally, the situation of tight stock before throwing the stock last year made the cotton price rise suddenly.

Back to this year, although we believe that demand has recovered a lot, and the demand for cotton has been raised, it is not enough.

In the first half of the year, when we met with market participants, we thought that the demand for cotton was about 7 million 500 thousand tons or 7 million 800 thousand tons this year, which is already very good. But from the current situation, it is possible to reach 8 million tons or even 8 million 300 thousand tons.

In fact, besides China, the demand in the international market has continued to exceed.

We see that the adjustment of demand in the last two years by USDA is basically based on the high level of adjustment. There are few downgrades. These are the main reasons for supporting the global cotton price.

According to the current situation, annual output has increased by 1 million 920 thousand tons, of which India has increased by 430 thousand tons, the United States has increased by 400 thousand tons, Pakistan has increased by 320 thousand tons, China has increased by 270 thousand tons, and the four main producing countries have increased significantly. Even if the latter weather is abnormal, the probability of large increase in production this year is great.

From the balance sheet of supply and demand, it is difficult to change the stock market at the end of the international market.

The above is from the supply of cotton, but the profit is obvious.

On the other hand, it gives us an optimistic side.

Although USDA has been increasing global cotton consumption, the magnitude of its increase is questionable, especially in the India market.

From the perspective of supply and price in India, the demand should be greatly improved. However, we did not see the reasonable adjustment of USDA, and the consumption in India in 2016-17 also showed a slight downward adjustment.

The author believes that the adjustment of India market in the late USDA should be more obvious.

The demand for the world market is strong, and it can be seen from the export of US cotton.

In the 2016-17 year, the US cotton export increased significantly, and the US cotton pre sale in 2017-18 also achieved very good results.

2016-17 degrees accumulated 3 million 450 thousand tons of contracts, 2 million 160 thousand tons in the same period last year, an increase of 1 million 290 thousand tons; in the 2017-18 year, the US cotton pre-sale totaled 1 million 110 thousand tons, compared with 522 thousand tons in the same period last year.

Although USDA has lowered its export expectations for us cotton in 2017-18 based on other considerations, the current pre-sale situation is very good.

Based on the above situation, I believe that USDA underestimated global consumption and will continue to increase in the later stage to offset the impact of global output upgrades. The seemingly huge supply pressure will have less impact on the market.

In addition, China may enter imported cotton in 2017-18, and will significantly reduce the end of the international market stock.

Therefore, although the market is generally pessimistic, but from the current price point of view, the international market is supported by consumption, and there is a limited space to fall.

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