Xiao Fengbo: What Will Be The Impact Of The 2019 Rotation Of Cotton Reserves On The Cotton Market?

After the May 1, the cotton reserves will start.

In the case of low demand for cotton yarn and lack of low-quality cotton in the market, the last feast of cotton reserves will still be eagerly awaited by the market. What kind of impact will the short-term supply increase on the domestic cotton market?

Will it trigger the ICE cotton futures resonance?

How will the auction price be deduced?

How should the participants of cotton industry chain respond?

The fact that short-term supply is increasing and the annual supply is decreasing is hard to change.

In terms of quantity, the planned output of cotton reserves in 2019 was about 1 million tons, much lower than that of nearly 3 million in previous years. Even if the final turnover rate was 100%, it would be reduced by more than 1 million 500 thousand tons over the previous two years.

If we consider importing, this year's quota of 894 thousand tons plus 800 thousand tons sliding quota will be the same as that of last year, and the total supply of cotton reserves and outer cotton will still be reduced by more than 1 million tons.

Although the state indicated that it would be possible for the latter to increase the quasi tax quotas in the late stage, considering that the time should be after August, combined with the current price and the weak demand for cotton yarn, the author believes that the probability of the additional quota is smaller.

Therefore, the supply of cotton reserves and cotton this year is less than that in the past two years.

Auction of high turnover will be the bottom of cotton prices.

From May 5th to 10 thousand tons of cotton pads in the year, 2011 cotton is the least, cotton in 2013 is the majority, the quality may be better than originally expected, and traders have not been restricted auction, cost-effective cotton reserves will inevitably attract a lot of traders' enthusiasm to participate, it is expected that the start of a month will be close to 100%, and hot scenes will naturally raise prices.

At the same time, the output of the cotton reserves is only 1 million tons, and its psychological impact is greater than the real effect.

With the gradual recovery of demand, the purchase quantity of quality cotton will rise in the later stage, thus limiting the price decline.

In addition, ICE cotton futures have been adjusting recently, and there will be less room for further decline in the later period.

Reserve cotton keeps decreasing, and cost-effective cotton will withdraw from the stage of history.

2019 after the completion of the central cotton reserve, the remaining stocks of the state reserve cotton will be low.

Although the imported cotton has the advantage from the inside and outside spreads, with the increase of quotas, the price gap between inside and outside will tend to shrink.

Therefore, it is foreseeable that domestic cotton prices will be weakened by wheel storage in the future, and the number of reserve cotton with high cost performance will be more and more scarce and gradually withdraw from the stage of history.

The probability of futures price rising is bigger.

For domestic cotton, the current decline has the psychological impact of the reserve cotton wheel. However, from the base point of view, at present prices, there is almost no arbitrage space in the registered warehouse receipt, even if it rebounded 300 yuan later, the attraction for the warehouse receipt is also smaller, and the pressure of the insurance package is greatly reduced.

From the perspective of ICE cotton futures, futures prices will fall back due to lack of news in the absence of the Sino US trade negotiations and the normal cotton cultivation in the United States. However, with the expected reduction in planting area, the drop in space is limited. It is estimated that 75 cents will have strong support.

Judging from the difference between domestic and foreign cotton prices, the price difference between domestic cotton and imported cotton is about 1100 yuan / ton, which is at a reasonable level.

If the domestic prices continue to fall after the reserve cotton enters the market, the domestic and foreign price differentials will continue to shrink and domestic competitiveness will be enhanced.

Although the narrowing of domestic and foreign spreads is a major trend, short-term quotas will attract buyers to intervene. Therefore, it is likely that the trend is to bottom up and pick up again.