Lack Of Domestic Production Needs To Set Up A Long-Term Basis For Cotton Rising.

After entering January, the main contract of cotton futures continued to rise under the impetus of macro factors, and cotton futures weakened again in recent years under the influence of tariff quotas and other news.

From a fundamental perspective, the global cotton inventories declined sharply compared with the previous year, and the tight supply overall laid the foundation for the rise in global cotton prices.

However, the US government has stopped recently, and the USDA report is difficult to produce, making the market lack of guidance, and the influence of the macro level and news surface is increasing, which makes ICE cotton price consolidation.

Domestic cotton, the supply gap exists, the national cotton stocks are relatively limited, and late textile mills have replenishment needs, in the domestic supply shortage, long-term cotton prices will eventually rise.

However, the number of warehouse receipts is the highest in the same period of history, making cotton prices difficult to pick up in the near future.

From a global perspective, the end of global cotton inventories in 2018/2019 declined sharply compared with the previous year, and the tight supply situation has taken shape.

In addition to other parts of China, the cotton consumption ratio is only 50.9%, which laid the foundation for the long-term cotton price rise.

China's national cotton reserves are low, and the foreign exchange market will probably be replenishing stocks.

Making the situation of tight global cotton supply intensified, pushing up international cotton prices.

Cotton production in the United States, India and Pakistan has declined, and ICE cotton prices have been driven upwards.

Because of the shutdown of the US government, the Ministry of agriculture's data continue to be difficult to produce, making ICE cotton prices short of guidance.

At present, the actual shortfall of cotton in China is still 920 thousand tons.

State reserve stock is less than 3 million tons, and there are no shortage of quality cotton such as Chen cotton.

The number of cotton that can be used in national cotton reserves is very limited, which makes it difficult to implement the new year's dumping. However, after the lack of state cotton storage, China's cotton market gap exists, and the source of this gap is only overseas. At the same time, the state reserve cotton as the strategic reserve of the country is difficult to keep low, and the rate will probably increase the stock through external cotton and increase the ability to resist risks.

But in addition to China's region, cotton stocks are also in the low position in recent years, and cotton production has also declined in the new year.

Although the quasi tax quota is issued, the high international cotton price will lift domestic cotton prices after digestion of domestic cotton warehouse receipts.

At present, the processing capacity of cotton in Xinjiang is low, and the supply of new cotton in China is basically over. The quality and quality of cotton have been declining. The sales rate has been declining. In the short term, Zheng cotton futures have risen slightly, and many cotton ginning factories choose to register their warehouses to protect cotton, which makes cotton prices difficult to rise.

Weak demand for the downstream consumer market aggravated the weak market. At the end of the year, the spinning enterprises had the behavior of returning the funds to low prices. At the same time, with the approaching of the Spring Festival holiday, the expected increase in the rate of commencement of the textile enterprises was reduced, and the weakness of the consumer side continued.

But in the long run, there is a demand for replenishment in textile mills, and the long-term cotton price will eventually rise in the context of insufficient domestic production.

In December 2018, China's Manufacturing Purchasing Managers Index (PMI) was 49.4%, down 0.6 percentage points from last month, below the critical point for the first time in July 2016.

The manufacturing industry has weakened.

China's CPI and PPI index rose by 0.3, 1.8 percentage points compared to last month, and with the early overdraft of consumption, CPI, PPI rose by 0.7 percentage points respectively.

Overall, domestic supply and demand at both ends of the risk increased, the domestic cotton yarn market as a whole is light, at the same time, with the Spring Festival holiday approaching, textile enterprises start reduction rate is expected to increase, textile enterprises have begun to leave.

Downstream enterprises in order to return the funds, do not hesitate to carry out price reduction sales, all of which make the downstream weakness continue, supporting the cotton slightly weak.

The demand for replenishment of long-term textile mills is still in demand, which will bring support to the cotton market.