How Does Sino US Trade Relations Affect Cotton? 2019 China Cotton (Zhangjiagang) Forum To Explore Market Trend In The New Year

2018 is the third year of China's continuous dumping and storage policy. It is also the year when China's cotton industry responds to the end of the state supply side reform.

This year cotton trend is commendable, beginning in May, the cotton market ended the broad and wide range of shocks, the strong rise; after the adjustment of the quasi tax quota policy, the price stabilized; the state cotton storage wheel extended to the end of September, the new and old cotton seamless link; Sino US trade friction, ups and downs.

In the new year's time node, the global economy has been greatly oscillating, Sino US trade relations are delicate and sensitive, and the development of the cotton market is attracting attention.

In January 3rd, sponsored by Zhangjiagang cotton trade association and Huatai futures, China's Huafang group, Jiangsu Dong Guo import and Export Co., Ltd., Jiangsu Yi Mian Agel Ecommerce Ltd, Zhangjiagang bonded area Zhong Rong Logistics Co., Ltd. and Jiangsu Jinsheng International Freight Forwarding Co. Ltd. and other units jointly organized the "2019 China Cotton (Zhangjiagang) forum" held in Zhangjiagang city. More than 400 people from Futures Company, cotton trading company, trading market and textile enterprises discussed the development trend and risk control of the new cotton market in the new year.

Cotton market under Sino US trade friction

Chen Tao, chairman of Louis Da Fu (China) trading limited liability company, analyzed the situation of the United States and cotton under the Sino US trade friction. He said that Sino US trade friction has many uncertainties at present, but it is certain that both sides have the desire to reach a settlement.

Although the US stock market is now down, from 2017, the US economy is doing well. It is very good from the indicators of employment and enterprise profitability, especially the tax reduction measures are good for enterprises and citizens.

China's economy is also developing steadily, and the prospect of Sino US relations can be expected, but it is impossible to return to the previous situation.

At present, China has begun buying American agricultural products such as soybeans, corn and rice, but has not yet bought new American cotton. In the future, it will not rule out buying more cotton.

Chen Tao believes that agricultural products may have entered the initial stage of the bull market. The future of cattle is only a matter of time. At present, there is not much cotton stored in the country, and cotton is still very competitive.

It is difficult for us cotton to be replaced by three silk and high quality. It is hoped that China and the United States will reach an agreement to avoid trade conflicts.

Fu Aimin, chairman of Rui Fu Cci Capital Ltd, believes that the impact of Sino US trade friction on cotton is only partial and temporary. This will take a long time, and some of China's demand will shift to Southeast Asian countries, which will not change the supply and demand of global cotton.

According to the current US cotton quotations plus 25% tariffs, the cost of importing cotton to the domestic market has reached 20000 yuan, which is upside down with domestic cotton prices. If imported from Brazil, Australia and India, first, they do not have an export supply of millions of tons.

Second, even if there is price, it will rise.

Therefore, the serious internal and external upside down of cotton is not sustainable at present.

Since May 2017, China has substantially reduced the US cotton orders, and the US cotton contract is expected to be replaced by India cotton. Due to the low cost of import, cotton cotton has become a good choice for China's imports of cotton.

Brazil's cotton exports may turn to China, while the US cotton export destination will shift from China to Brazil.

China has imported about 1 million tons of cotton in recent years, and imports of American cotton account for only 10% of the total imports.

Sino US trade friction will aggravate the shortage of cotton supply in the short term, but in the long run, the impact of trade friction on the cotton market is limited, and the global cotton supply and demand pattern will not change significantly.

India cotton cited concern

Under the background of Sino US trade friction, India cotton has also attracted people's attention.

Zhu Gensheng, the representative of India enterprises and general manager of Regal cotton, introduced the situation of India's cotton market.

He said that the drought resulted in the reduction of cotton yield per unit in 2018/19. Due to the delayed monsoon, especially the Gujarat monsoon delayed by about two weeks, the planting was postponed. In 2017, rainfall in India's cotton producing area was significantly lower than the normal level. After September, there was very little rainfall, and the growth of cotton was greatly affected, which had a greater impact on the picking of the second and third batches.

Because 50% of cotton fields in India did not irrigate, the average yield was lowered.

As of the end of December 2018, the new cotton market volume of 11 million 700 thousand packs, 1 million 989 thousand tons, and 17/18 basically flat.

In terms of domestic consumption in India, the main cotton producing countries have actively introduced textile support policies, and textile production capacity has further expanded.

The spindle number of India is about 50 million, and about 800 thousand head spinning.

The number of yarn exports increased, textile and garment exports increased, and market share expanded.

Cotton yarn Futures Rules have changed

As the most important material of raw materials and textile industry, cotton has been listed for 14 years, which has played a great role in avoiding risks.

Wei Huangyang, senior manager of market Services Department of Zhengzhou commodity exchange, introduced new changes in the cotton futures market.

He said that the State Reserve regulation has entered a new era, and the supply and demand situation of cotton is more complicated. The state reserve cotton stock is approaching the safety line, and the regulation of cotton reserves has entered a new mode.

In September 2017, the Xinjiang cotton futures delivery warehouse was officially opened, and the operation effect was remarkable. Xinjiang warehouse highly serves Xinjiang cotton industry to participate in the futures market.

Cotton yarn futures have also been listed. Spinning enterprises can sell cotton futures while buying cotton futures and complete arbitrage operations, thus locking the risk of both ends.

Wei Huang Yang revealed that the cotton yarn Futures Rules are being revised and are expected to be released in February this year.

The optimization rules are embodied in expanding the delivery scope, timely launching the delivery of cotton yarn futures warehouse, optimizing the quality index system of cotton yarn futures, enhancing the directivity of futures prices, shortening the validity period of warehouse receipts, and improving the quality guarantee.

Quality of imported cotton decreased.

According to statistics, in 2018, the Zhangjiagang customs handled 446 batches of inspection and quarantine imported cotton, weighing 116 thousand tons, with a value of 230 million US dollars. Compared with the same period in 2017, the batch, weight and value of goods increased by 20.2%, 14.9% and 27.8% respectively.

Zhangjiagang's cotton imports account for about 9% of the country's imports, accounting for 34% of the total imports of the province, ranking first in Jiangsu.

In 2018, the import of cotton increased. Zhangjiagang customs experts believe that, first, with the expected decline in the scale of China's cotton reserves, there is a contradiction between supply and demand of domestic cotton and the increase of imported cotton. Two, with the deepening of the domestic textile industry's supply side and the influence of currency exchange rate fluctuations, the import trade opportunities of cotton will increase correspondingly. Three, there is still a great degree of dependence on the imported cotton, such as "no three silk" and "long staple cotton" and so on, and also urge the domestic enterprises to import cotton that meets their spinning requirements.

However, the overall quality of imported cotton in Zhangjiagang decreased in 2018.

The quality of cotton imported from the United States and India, which accounts for 50% of imports, is relatively poor, which determines the quality of imported cotton from Zhangjiagang.

Secondly, the arrival quality of African cotton in Benin, Togo and Ivory Coast fluctuated greatly, and the rate of non conformity of cotton grade and length index increased, especially the rate of non conformity of length index increased significantly compared with previous years.

Australian cotton, which is famous for its good quality and good consistency, failed to comply with the grade and length index of cotton.

And relatively stable quality of cotton imports in Uzbekistan decreased significantly over the same period.

The import weight of imported cotton is worse than that of 2017.

Field inspection showed that more than 81.4% of the imported batches had short weight problems, and the average short weight rate was 0.95%, which rose compared with 0.66% in the same period in 2017. The highest short weight rate was 4.31% (India cotton). Only those batches of India cotton had a short weight rate of more than 3%.

The reason for the increase in short weight rate is mainly due to the recession of international cotton trade since 2017. Due to various reasons, the fluctuation of international cotton prices is relatively large, resulting in the increase in cotton prices when some cotton traders want to go up because of the lack of delivery.

In 2017, the short weight batches of imported cotton in Zhangjiagang increased year by year. The year before last, 73% of import batches appeared short weight.

In 2017, the weight loss rate of cotton in major importing countries, the United States and India was higher than that of the general average.

Experts from Huatai the Great Wall Vantage Capitals Ltd, Henan TongZhou cotton company and Jiangsu Yi Mian Agel Ecommerce Ltd have also made speeches on the application of OTC options in enterprise risk management, hedging of cotton enterprises, and promotion of easy shopping platforms.

The representative of the leading enterprises also talked about the impact of Sino US trade friction on cotton, how to carry out enterprise risk control, cotton futures price, off street options and other topics in the cotton industry chain.