What Is The Trend Of Cotton Production With High Yield In The Sino US Trade Negotiations?

Under the influence of the backlog of registered warehouse receipts, the high output of Xinjiang cotton and the external fluctuation, cotton futures have remained weak since the beginning of the festival. With the beginning of a new round of Sino US economic and trade consultations, whether the start-up of downstream demand of cotton can boost the trend of the market has become one of the focuses of the recent market. In the long run, the market participants say that the macro level is still the main keynote of the bull market, and the impact of the changes in warehouse receipts and quotas on the fundamentals is worth noting.
　　
Two days after the opening of the cotton futures market, the market first dropped and then rose.

During the Spring Festival break in China, the foreign exchange market was strongly influenced by the US dollar and the global supply and demand report released by the US Department of agriculture. The ICE cotton contract decreased by nearly 2.5%, but on Monday, the foreign exchange market continued to remain weak and fell to its lowest level in more than a year.

Compared with the weakness of the outside market, Cheng cotton futures in the inner market fell after the first day of the session, and the first two days after the opening began to fall and then rose. In February 12th, Zheng cotton's 1905 contract spread to nearly 2%, the settlement price was 15320 yuan per ton, and cotton yarn futures also rose.

For the weak market in the market on Monday, the market generally believed that it was mainly affected by the decline of the foreign market during the Spring Festival. In addition, Xinhua reported that Xinjiang's cotton output reached a new high of 5 million 111 thousand tons in 2018, an increase of 11.9% over 2017, accounting for 83.8% of the country's total, representing an increase of 9.8 percentage points over the same period last year.

According to the news, the output has reached a new high level, thanks to the further expansion of planting area. In 2018, Xinjiang cotton sown area reached 37 million 370 thousand mu, an increase of 12.4% over the same period last year. Xinjiang's total cotton production, yield per unit area, planting area and commodity allocation ranked first in the country for 24 consecutive years.

In addition, thanks to the implementation of a series of measures in Xinjiang to support the development of cotton and related industries. In recent years, the whole mechanization has been widely promoted in Xinjiang cotton field. Autonomous Region Agricultural and rural office data show that more than 80% cotton fields in Northern Xinjiang have been fully mechanized, and the mechanization rate in southern Xinjiang is also close to 2.

In order to improve cotton quality and speed up the supply side structure reform, Xinjiang in 2018 in Shawan, Manasi, Yuli and other 6 counties, according to quality subsidies, required cotton fiber length and intensity to a certain extent, planting area to a certain area and other standards, cotton farmers can get 0.3 yuan per kilogram subsidies. At present, there are 19 cotton notarization laboratories in Xinjiang, and the quality subsidies are issued on the basis of their quality inspection results, so as to mobilize cotton farmers' enthusiasm for planting cotton.

As for the impact of news on the disk, market views differ. Huan Yongping, deputy general manager of cotton and hemp in Nantong, although the market is affected by many factors such as internal and external linkage and data from the Ministry of agriculture, Xinjiang cotton production is the main reason for the weakening of the first day of opening.

Another market source said that the output data need to be further confirmed. In the short term, the internal market volatility mainly came from the fundamentals, and the registered warehouse receipts continued to suppress the disk.

Ruida futures said that from the supply side, cotton industrial and commercial inventories are still in the same period of historical highs. After the festival, domestic cotton textile enterprises have started construction, but the market is still dominated by sales inventory.
　　
Sino US economic and trade consultation is coming soon. Industry chain enterprises have a wait-and-see attitude towards downstream demand.

So what factors affect the short-term market of cotton futures under the current market fluctuations? Many market participants have shown that, as the focus of the current industrial chain, the downstream demand is still weak, and the changes in the future of Sino US trade disputes will affect the actual demand of the market.

"From the current understanding, downstream demand is still weak, as for the situation, many enterprises in Guangdong are still on vacation." Wang Dongyang, purchasing specialist of the cotton seed meal group of Guangdong Haida group, said that the short-term market trend should pay attention to the final results of Sino US trade issues in addition to paying attention to the downstream start-up and order status.

"Now the downstream industry is not optimistic about the use of cotton, cotton yarn inventory is large, not good sales." Huan Yongping said that the overall production volume of domestic and downstream cotton textiles exceeds domestic demand and therefore needs to be exported. At present, Sino US trade consultation is very important to the export of textiles, and the short-term market is likely to show a steady trend.

Recently, the Chinese Ministry of Commerce recently announced that the Sino US trade team will hold a new round of Sino US high-level economic and trade consultations in Beijing on 14-15 February. According to the announcement of the Ministry of Commerce of China, Liu He, the vice premier of the State Council and the Chinese leader of the Sino US comprehensive economic dialogue, will meet with the US trade representative, Mr. lettchet, and finance minister Mnuchin. The two sides will further discuss the issue of common concern on the basis of the recent Washington consultations.

Meyer futures said that although Zheng cotton is facing a recovery increase, it still needs to be vigilant against the negotiations. The market is not optimistic about the progress of Sino US trade negotiations.

Yongan futures said in its 2019 research report that the domestic cotton market is still in the out going inventory cycle, and the supply and demand structure of the industry is good. However, after the price has risen continuously across 3 natural years and 2 market years, the extent of the medium-term adjustment depends on the consumption and the macro situation.

For the prospect of Sino US trade, there are three different trends in the future of Sino US trade friction: first, the two negotiating groups reach a settlement agreement within 90 days. China's export orders to the US apparel industry are expected to rebound sharply, and cotton demand is qualitatively guaranteed. Second, the two sides have reached a compromise in certain areas (such as agricultural products). This is also a relatively positive good; third, the negotiations have not reached an agreement, and the impact of the cotton consumption will be enormous.