Zheng Cotton High Storage Pressure Needs Digestion.

Zheng cotton began its current round of decline since mid April, when its biggest drop was close to 20%. But last week, Zheng cotton came out of the biggest rebound in the current round, and the market rose nearly 4% during the week. However, in the current stock market pressure and the downstream demand continues to weaken, we believe that Zheng cotton short-term market is still not optimistic, but at the end of the G20 meeting, the leaders of China and the United States may affect the mood of trade disputes.

USDA6 report neutral neutral

The latest USDA6 monthly supply and demand report shows that the output data of major countries have not been adjusted compared with that of May. In the US, harvest area and total output are still the highest since 2006/07, and ending stocks continue to rise for the first consecutive year. At the end of next year, stocks will reach a new high of 1 million 393 thousand tons in the past 10 years. The output of India will increase by 544 thousand tons to 6 million 205 thousand tons. Brazil will increase its final output by more than 2 million 717 thousand tons due to the substantial increase in output this year, although the export data reach a new high of 1 million 785 thousand tons.

Compared with the data in May, consumer demand data showed signs of weakness. In June, the report lowered consumption figures in some countries in Southeast Asia. China's import demand was lowered by 109 thousand tons in 2019/20, and its consumption corresponded to 109 thousand tons. At the same time, the domestic consumption of 109 thousand tons was cut down in 2018/19, and the final inventory was 263 thousand tons higher than that in May. In addition, consumption in Bangladesh and Vietnam decreased by 21 thousand tons respectively.

Cotton reserves weakened

In the short and medium term, the domestic stock pressure is still greater, and the import of cotton and cotton yarn has increased substantially. Considering the factors of increasing import quotas and storing cotton, the market supply is very abundant.

May data show that the current domestic commercial inventory of 3 million 528 thousand and 100 tons, the absolute number of stocks is still a record high in the past, in December 2018 began to calculate, 5 months, a total of 1 million 431 thousand tons dropped, but in 2018 the same period dropped 1 million 599 thousand and 700 tons, from the cumulative decline in the Treasury level and monthly data, and the past 5 years level is basically the same. Accordingly, it is assumed that the commercial inventory will be more than 2 million 850 thousand tons in August.

In April 2019, 180 thousand tons of cotton and 190 thousand tons of cotton yarn were imported in China, and 1 million 440 thousand tons of cotton and 1 million 300 thousand tons of cotton yarn were imported in 2018/2019, representing an increase of 650 thousand tons and a reduction of 40 thousand tons compared with the same period last year. Cotton imports increased by more than 80% over the same period last year. In the past 4 years, the annual import volume of cotton was 1 million 670 thousand tons, 965 thousand tons, 1 million 100 thousand tons and 1 million 320 thousand tons respectively, while the annual import data of cotton yarn remained at the upper and lower levels of 2 million tons.

In addition, the situation of cotton reserves has slowed down recently. After more than 3 years of dumping and storage in China, the total turnover was 8 million 650 thousand tons. At present, the domestic stock has dropped to 2 million 660 thousand tons, and the inventory pressure has been greatly alleviated. But short term reserve cotton spanaction showed signs of weakness, the early 100% turnover has dropped to 50% in the near future, the spot mood pessimism, the reserve cotton demand has also dropped to freezing point.

Short term demand is still not optimistic.

Despite the improvement in textile and garment exports in May, the pressure on inventory of textile enterprises has reached a record high, and short-term demand is still not optimistic.

Data show that in May, China's textile and clothing exports amounted to US $23 billion 831 million, a growth of 22.46%, an increase of 1.65% over the same period last year. In 1-5, the total export volume of textiles and clothing in China was 99 billion 589 million US dollars, down 2.88% from the same period last year. The total export volume of textiles was 48 billion 312 million US dollars, an increase of 1.41% over the same period last year, and the total export volume of garments was 51 billion 277 million US dollars, down 6.60% from the same period last year. Single month data showed signs of improvement, but did not exclude enterprises from grabbing orders before the new round of tariffs. The overall order of the enterprises is relatively poor. It is expected that the latter export will be weakened again.

The inventory of finished products of spinning enterprises is now verifying the weakness of current demand. The continuous decline of industrial inventories shows that textile enterprises have a poor desire to replenishment, while the yarn stock days in May are 30.6 days, an increase of 6.8 days compared with April, an increase of 8.56 days compared with the same period last year. In May, the number of grey cloth storage days was 34.1 days, which was 3.9 days higher than that in April, much higher than that of 23.05 days in the same period last year.

To sum up, although the global cotton supply and demand pattern continues to improve in the medium and long term, this requires the coordination of external environment. At present, both ends of the supply and demand of Zheng cotton are under pressure. High inventory pressure needs time to digest. Under the weak demand of the downstream, Zheng cotton is still not optimistic in the short term. But in the short term, attention should be paid to the trend of Sino US trade disputes. If the situation of short-term trade disputes improves, Zheng cotton will have a stage rebound. On the disk concerned about zhengmian 14000 and 14500 yuan / ton pressure line.