"Gold Three Silver Four" Season Cotton Market Can Start?

In the second half of last year, the dismal market of "iron nine copper ten", many market participants cautiously moved forward, and cotton market was full of pressure. After the Spring Festival, businesses from all over the country resumed their work. With the arrival of the traditional peak season of "golden three silver four", can the cotton market start up?

Since the listing of Xinjiang cotton in 18/19, the lint spot market is basically in a stable and weak position. The downstream textile enterprises just need to replenishment, and the social and industrial stocks continue to be high. For this reason, most of the cotton ginning factories in the territory choose to cotton linen cotton with superior index lint. Low index lint is used to raise funds for large traders by means of pledge capital, and the fund pressure is relatively abundant. As of March 15th, the number of warehouse receipts has exceeded 20 thousand, which is also the main factor to suppress the main rebound of Zheng cotton. Due to poor futures performance, most market participants wait for Zheng cotton main force to reach 15500 place for hedging. When Zheng Mian's main force reaches the low point, it undertakes the transaction of base point price. This way of operation is flexible and diverse, so it is recognized by many people in the industry. The warehouse and cotton trading mode is gradually active in the market. Because of the large number of warehouse receipts, market participants need to wait for the right time to operate, and warehouse warehouse cotton as a hidden social inventory, it brings pressure to the lint spot market.

Figure 12018-2019 cotton price trend statistics

As illustrated above, the difference between domestic and foreign cotton prices has been widening. Since the end of last 12 months, the difference between domestic and foreign cotton prices has been gradually expanding. The advantage of external cotton is obvious, which greatly stimulates the market to rush to buy cotton. According to my agricultural product network, recently, port Brazil cotton, India cotton and Australia cotton were better off, accounting for more than 85% of the total shipment volume. Since the quota of imported cotton has been issued quarterly this year, some spinning enterprises are too fast to meet production needs, and urgently need to send quotas to the market. Most traders see the advantages of imported cotton, and the traditional Xinjiang cotton business adopts flexible operation mode, basically buying and buying. As the macro side welcomed the good news, the Sino US economic and trade consultative process has been improving. Originally planned to increase the tariff rate plan by 25% in March 2nd, the market confidence was boosted and traders were in the same boat. Due to the lack of domestic cotton production, the author believes that the demand for imported cotton will gradually increase. If Sino US talks are successful, the import cotton market will be more active, and cotton will be blocked.

Table 1 USDA3 month report cotton

As shown in Table 1, according to the latest USDA3 monthly report data, domestic cotton consumption basically maintained about 8 million tons, while 18/19 domestic cotton output was about 5700000 tons, plus the annual import of about 1000000 tons of foreign cotton. Data show that about 2 million tons of consumption gap needs to be filled by national cotton reserves. The recent market frequent outflow of dumping rumors, the reserve cotton warehouse has received notice of public inspection, many cotton industry chain people hold a wait-and-see attitude. At present, there are still 2 million 750 thousand tons of cotton stored in the state which have not yet been digested. In the short term, domestic cotton is still abundant and market supply is loose. In the medium term, domestic stocks will gradually decline at the end of the term, and domestic cotton will not produce enough, and market supply will be tight. There may be opportunities for cotton market in the future.

At present, the global economy is under downward pressure, domestic consumption is still weak, and consumption power is insufficient. Downstream cotton spinning enterprises tentative price adjustment, but the price rise support power is insufficient, terminal demand is still general, so the conduction to raw material upstream cotton market is still tense. Despite speculation in capital markets last May, Zheng cotton futures rose more than 19000, and the lint spot market also rose, but in the end it was only a flash in the pan. I believe that stimulating cotton prices will ultimately depend on the fundamentals and look at downstream consumer demand. In recent days, the state has implemented the policy of lowering taxes and reducing fees. Since April 1st, the value added tax has decreased from 16% to 13%. This measure is conducive to reducing the financial pressure of textile enterprises, reducing the production cost of spinning enterprises, and promoting the consumption demand of the market.

In summary, due to the pressure of zhengmian warehouse receipt, the difference between inside and outside cotton prices and the pressure of social inventory pressure, the current cotton market is still stable and weak, and the downstream demand is general. The gold four silver market is difficult to open. But in the future, the results of Sino US economic and trade consultations, the new cotton planting situation, the weather change and the national cotton reserve policy will all affect the future cotton market. Opportunities and challenges coexist. It is suggested that market participants should carefully operate and seize opportunities.