Will The Domestic Cotton Prices Drop If The Cotton Reserves Are Released For Two Days?

On the first day after labor day, cotton reserves were officially issued.

In the previous quarter, the turnover rate of reserve cotton was relatively low, and the turnover rate of 100% days in these two days also reflected market demand.

In May 5th, Huixian Hengxiang textile, Shandong Xing Hui Guotai logistics, Gaoyou Jingwei Textile and other 41 enterprises participated in the paction.

How is it different from previous years?

At present, the demand for cotton yarn is not strong. According to the latest data, the number of cotton yarn imports increased, and the export of cotton cloth decreased. In March, 191 thousand and 300 tons of cotton yarn imported in China increased by 59.60%, an increase of 11.14% over the same period last year. In March, the export of cotton cloth was 699 million meters, an increase of 73.23% in the ring ratio, a decrease of 25.11% over the same period last year.

In 2019, the cotton reserve plan was around 1 million tons, far below the nearly 3 million tons in previous years.

Even if the final turnover rate is 100%, it will be reduced by more than 1 million 500 thousand tons over the previous year. If the total amount of cotton imported this year is the same as last year, the total supply of cotton reserves and imported 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 the time node after August, combined with the current price and the weaker demand for cotton yarn, the probability of the issuance of the quota would be smaller.

In May 5th, cotton caught in May 5th, cotton in 2011 is the least, cotton in 2013 is the majority, quality may be better than originally expected, and traders have not been restricted to auction. The high cost effective reserve cotton will inevitably attract many traders' participation, and the hot scenes will naturally lift prices.

Moreover, the quantity of the reserve cotton wheel is only 1 million tons. With the gradual recovery of yarn demand, the purchase quantity of quality cotton will rise in the later stage, and the price of reserve cotton is unlikely to fall.

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

2019 after the completion of the central cotton reserve, the remaining stocks of the state reserve cotton will be at a low level. Although the imported cotton has the advantage from the cotton price difference at home and abroad, the price difference between the domestic and foreign cotton will shrink with the increase of the quota.

Therefore, the 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.

According to the head of the national development and Reform Commission in late March, "after three consecutive years of large-scale inventory, the future domestic cotton gap will be met mainly through imports."

In other words, reserve cotton is no longer the main way to protect the cotton supply gap in the domestic market in the future.