Cotton Market After Severe Shocks, The Market Usher In A Big Change

Maybe it is the rule of futures investment market.

It is undeniable that the whole industry chain economy and investors are following this curve up and down, and the magnitude is too large, which is bound to cause harm to the industrial chain.

Last week, Zheng cotton appeared two consecutive down boards, which attracted the strong concern of investors. Just like mid May 2018, it was just "the same year, the same age, the different years."

Many articles focus on analyzing the causes and trends of the market. After two successive stops, the "earthquake effect" is much more than simply the price fluctuation.

How big is the impact of this round of limit?

In April 23, 2019, the State Grain and material reserve bureau and the Ministry of Finance announced in 2019 first: "in order to optimize the structure of central cotton reserves and ensure good quality, some central cotton reserves will be rotated in 2019".

According to the official saying, ensuring market supply is no longer the main objective of this year's round. It can also be seen from around 10 thousand tons.

Before May 13th, the reserve cotton industry maintained a high turnover rate. After all, compared with commercial cotton and reserve cotton, it still had great cost performance advantages.

The abrupt turn of events was on the day of zhengmian down, it could be said that a negative line changed the three views. Not only did the cotton turnover rate decrease significantly, but also the sale of commodity cotton stopped abruptly, and spot trading almost fell to freezing point on the same day.

According to China cotton net reporter, the impact of the incident is more than that.

As the Sino US trade negotiations continue to wavering, market sentiment has also become pessimistic. The two limit is a good example.

"CF1905 contract fell to a minimum of 13820 yuan / ton, of course, with the recovery of sentiment in the market, Zheng cotton rebounded, but from the market trend, now the high position of Zheng cotton has become the low position before the limit, and whether the low point can support will also depend on the future progress of Sino US trade talks," a market insider said helplessly.

On the occasion of the fall of Zheng cotton, the ICE of the United States cotton also fell sharply, and the price fell to the low position of nearly three years. The difference between domestic and foreign cotton prices continued to pull up to 2000 yuan / ton, which has already exceeded the domestic market endurance. Therefore, the domestic spot price has the desire to repair the deficit. In this situation, the adjustment of the reserve price of the cotton wheel in accordance with the linkage pricing strategy of the internal and external cotton price linkage is inevitable.

When cotton prices are in a downward trend, market participants can only be more cautious. The late cotton turnover rate also depends on the trend of Sino US negotiations and domestic and foreign market cotton prices, "said a cotton analyst.

According to China cotton net issued the bottom price announcement, third weeks (May 20th -5 month 24 days a week) out of the sale base price of 13893 yuan / ton (standard class price), compared with the previous week fell 579 yuan / ton.

Faced with the question of when the market adjustment will be over, Wu FA Xin, chief strategist of Shanghai Yarn Technology Co., Ltd., said: "at present, short and long sky is the keynote. The commodity market will ultimately see the balance between supply and demand," black swan "and other interference factors will exist, but will not change the trend.

Cotton is in big market for ten years and the next bull market is estimated because the trade war will be delayed until 2020.

In addition, this round of limit may accelerate the expansion speed of Xinjiang machine picked cotton.

According to the reporter, in 2018, the machine processing cotton processing enterprises in Northern Xinjiang benefited from the low cost of purchase, and the processing was profitable. Even in the case of cotton prices last year, the processing enterprises in Northern Xinjiang could still get a share.

In contrast, southern Xinjiang hand picked cotton processing enterprises did not have the good fortune. Most of them were struggling to support, except for a small number of enterprises that were ordered to produce and sell immediately, because the cost of picking cotton was high, and spot sales were in a predicament when the market downturn.

Futures, even if Zheng cotton rebounded to the high price, also can not cover the processing costs, resulting in some enterprises have been unable to carry out the insurance operation, caught in a difficult situation.

According to the southern Xinjiang cotton enterprises, at present, the resources of the South Jiangsu ginning factory may have about 60% guarantee, and almost 90% of the traders are covered. Therefore, the failure of two cotton enterprises with no guarantee operation is too heavy.

The cost of 3128/3129 class cotton picking is 15200-15400, and hand picking is higher. The public price is generally 16000 yuan / ton.

Northern Xinjiang's "double 28" point price is quoted at 14600-14800 yuan / ton, and the price of the strong 26-27cN/tex is 14300-14500 yuan / ton, and the "double 29" price is only 14800-15000 yuan / ton, which may be 50-100 yuan / ton.

Such a high cost price and low market quotas forced cotton companies to rethink and pform, which may prompt a new round of enterprise elimination.

According to the data of China fiber quality inspection center, as of May 19, 2019, the total number of cotton tested in the country was 5 million 337 thousand and 356 tons, of which 5 million 139 thousand and 216 tons in Xinjiang and 198 thousand and 140 tons in the mainland, and 971 cotton enterprises in the country participated in the processing, of which 791 of Xinjiang's enterprises occupied the overwhelming majority.

Assuming that each processing plant has a processing line, processing 20 thousand tons of lint per processing line (processing period October -1 months), the processing capacity of 791 enterprises in Xinjiang has reached 15 million 820 thousand tons, and the capacity is seriously surplus.

Although the number of processing enterprises in Xinjiang has gradually decreased in recent years, there is still excess in comparison with Xinjiang's output.

Against this background, the processing and processing of machine picked cotton in North Xinjiang has been relatively stable and mature. Only a lot of hand picking cotton processing lines still exist in the southern Xinjiang. Under the market price forced mechanism, the pformation of enterprises is imminent.

If we want to pform, it means that enterprises must pay the price.

It is reported that a high-end machine picking cotton production line has a value of 9 million and a low price of about 5000000.

In addition to capital elements, the picking cotton planting mode also challenges its processing enterprises.

If enterprises can not adjust their planting patterns as soon as possible, enterprises will be useless even if they change their equipment.

A ginning enterprise in southern Xinjiang indicated that it is inevitable for the cotton picking enterprises to accelerate their exit. The two years will be even more prominent. The direct cost after picking cotton is higher than that of machine picked cotton, which is more than 1000 yuan / ton. The cost is high and the corresponding financial cost is higher.

This year, the machine harvested cotton enterprises have no losses, so long as the appropriate hedging or sale before mid April is profitable, the machine cotton picking plant is not shuffling.

In the upstream cotton fell sharply adjustment, the downstream cotton yarn also failed to escape.

Last week cotton yarn futures plunged, and the CY1909 contract fell from 24500 yuan / ton to the current 22100 yuan / ton.

When futures fall and fall, spot prices continue to fall, which is a great pressure on production and sales.

For textile enterprises, the most desirable thing is market stability, which is bad for all of them.

A textile manufacturer in Henan said that the sale of cotton yarn has stagnated since last week when the two sides began to impose tariffs on each other. Even if the price of cotton yarn was lowered, the downstream customers would be indifferent.

The head of the company believes that the impact of Sino US trade friction on the cotton textile industry chain is far greater than that of the industry.

At present, the Foshan market is full of people selling cotton yarn. All the sales personnel are sent to the first tier market by the spinning enterprises.

Some enterprises say that textile enterprises are suffering from both sides. On the other hand, the price of raw materials in the early stage of purchase is higher, which directly pushes up production costs. On the other hand, sales are blocked, and downstream customers do not offer or purchase.

For cloth factories, the uncertainty of the future trade situation forces them to dare not take orders.

The company reflects that it plans to suspend production for one month in June. After all, it costs hundreds of thousands of dollars a day to keep the company from eating.

According to him, small businesses have been shut down and shut down.

In view of whether or not to eliminate a number of enterprises in the future, the person in charge said: "this is a certain one, and now it is already showing signs."

Even if the enterprises purchase according to the raw materials after the price reduction, the production of cotton yarn is also a loss.

According to the press, not only that, Pakistan cotton yarn tariff free entry into China will also cause a great impact on domestic yarn. It was originally imposed a tariff of 3.5%, and the price was reduced by several hundred yuan after the tariff was cut off, which is very competitive in the domestic market.

Therefore, it is inevitable that the adjustment of textile enterprises is inevitable in the future. Enterprises with small scale and low product grades will take the lead in withdrawing from the market.

At present, China and the United States continue to search for the "Nash equilibrium point" on the seesaw. The result of the game is not known, but one thing is certain that the two countries are reconciled with the rest of the world. The United States insists on fighting. The result is only one thousand loss, and the adjustment of the domestic industrial structure will also be difficult to avoid.