Tang Zhen: In The First Half Of 2019, The Undercurrent Of Cotton Market Is Expected To Show The Trend Of Reverse Cycle.

The cotton market in 2019 came down in the trough. In December 25th last year, the main contract CF1905 of zhengmian futures was at a low level of 14650 yuan / ton during the year, and the whole cotton industry market also entered the cold winter. It seems that the cotton trade has been very difficult for the Sino US trade dispute that broke out in the second half of the 18 year. However, with the advent of 2019, the cotton futures market has gone through a wave of rebound in this historical low position.

First of all, from the basic point of view, in January, the US Department of agriculture's supply and demand data failed to be released because of the government shutdown. If there is a shortage of international cotton production according to the previous data, in theory, there are still more stocks in China to make up for it. From the domestic point of view, cotton processing in Xinjiang is coming to an end. According to the current progress and data statistics, Xinjiang's output is expected to be close to 5 million 100 thousand tons, plus the estimated 560-570 tons of cotton in the mainland. In addition, considering the quota of normal distribution and issuance and the supply of commercial inventories, if the trade war between China and the United States does not confirm the outcome, consumption will enter the off-season, and there should be no possibility of a substantial increase in principle.

But entering the 2019, there are some new situations that we need to constantly consider. In January 7th, China and the United States conducted talks at the vice ministerial level, and actively and constructively discussed the important consensus of the two heads of state meeting in Argentina. Although the final negotiations did not come to a conclusion, they provided an important foundation for further in-depth consultations. Vice Premier Liu He of the State Council also went to the United States to continue consultations in January 30th. Some positive signals have been provided to the market. The cotton consumption in the future may be more likely to be affected by the outcome of the negotiations. However, judging from the disk, the previous fall in prices has also digested the previous negative effect.

At home, in recent years, due to the lack of domestic cotton production, it has always been relying on the supply of cotton reserves to meet the needs of domestic textile enterprises. After 2016, the state implemented the normalization round out policy, but up to now, there is no news. Although at present, there are still a lot of new cotton in Xinjiang, and the procurement of downstream textile enterprises is very cautious. But as time goes on, is there any expectation of cotton tension at the end of the year?

On the economic front, the central economic work conference pointed out that the domestic economy is now facing downward pressure. It points out that macroeconomic policies should strengthen the counter cyclical adjustment. We can see that the government has a deep understanding of the current economic situation and has the determination to stabilize the economic trend through a series of policy operations. Sure enough, after the new year's holiday, the people's Bank of China announced the news of lowering the price and released the liquidity 800 billion yuan to the market. This move is in line with the spirit of the previous meeting, and I believe there will be further actions in the future according to the trend of the economic situation. This will make money in the market gradually become active from silence. For commodities, once speculation is possible, it may become the object of capital pursuit.

To sum up, for cotton, I believe that although the fundamentals are static, the period before and after the Spring Festival should be plain. But over time, due to many uncertainties and the different views of the industry and capital market on cotton, it may lead to an upturn in the market trend, mainly depending on the pursuit of the overall bulk atmosphere and capital. Therefore, for the cotton industry chain, the downstream enterprises should not wait too much, and be prepared for raw materials. Cotton producers and processing plants are also not eager to be optimistic at the moment. First, seize the market and give them opportunities. Speculators combine technology analysis to measure market entry with a high profit and loss ratio. No matter which side should not forget position control, wind control is very important in big fluctuation market. It is expected that under the influence of macro, policy, fundamentals and funds, the first half of 2019 will probably be a more tangled market.