Why Did Cotton Futures Rebound Sharply In The Near Future?

This year cotton supply and demand in China has been lax. Spin Downstream demand for the industry chain is not as good as expected, lint cotton social inventory is higher year-on-year, and inventory consumption is slow. In the early May, Sino US trade frictions suddenly escalated, and the pattern of the slow upward movement of the cotton market price center was rapidly broken. The demand market deteriorated rapidly, and the price of cotton futures was down. Recently, the price of cotton futures began to rally continuously after reaching the bottom, and the external environment was positive. The cost of lint cotton and the low stock of raw materials of cotton enterprises formed a downward resistance, and the recovery of base and import profits needed to rebound. India's seasonal wind and rain was not as good as expected or became a reserve force to help cotton prices rise.

The external environment is warming to provide positive support.

In June 18th, the heads of state of China and the United States exchanged telephone calls. Trump expressed his expectation of meeting with President Xi at the G20 summit held in Osaka, Japan at the end of this month. Sino US trade friction has changed to boost the global stock market, futures market and bond market. However, Zheng cotton has been greatly encouraged by this encouraging rise after its overfall. In addition, the implementation of loose monetary policy in many countries around the world is expected to help alleviate the pressure of slowing economic growth.

Use cotton enterprises' low inventory to form a downward resistance.

It is understood that the initial price of Zheng cotton has fallen below the cost line of the northern machine picked cotton, and the southern hand picked cotton also suffered losses. Cotton enterprises have strengthened their willingness to raise prices after the May capital pressure period, and the spot price of cotton linen has narrowed down obviously, and has begun to stabilize and pick up recently. The finished product inventory of textile enterprises has been backlog, the goods are not running smoothly, and forced to reduce the start up. Some enterprises have had a holiday in advance to cope with the stock pressure. On the basis of the purchase of lint, the spinning mills are very cautious in purchasing and purchasing. Compared with the accumulated industrial inventories in previous years, domestic industrial inventories showed a slow decline in recent months, and there is room for imagination in the subsequent replenishment of raw materials.

Base and import profit support support rebound space

From the middle of May to the beginning of June, the base period is in the rising stage. During this period, with the gradual consumption of high cost domestic lint and the rising cost of capital and warehousing, there is a certain price preference for cotton enterprises. At the beginning of May, the United States declared that it would raise the tariff rate of $200 billion on China's exports to the United States from 10% to 25%, and China and the United States once again raised tariffs on each other. The market was not optimistic about the follow-up progress. The list of 200 billion dollars included some of the yarn, fabrics and textiles exported from China to the United States, accounting for 20% of China's total exports of textile and clothing products and raw materials in the United States, while the United States also threatened 325 billion dollars of possible tariffs. China's exports to the United States almost covered the remaining 80% of the clothing and textile products. If the products were subject to 25% tariffs, the threat to China's textile and clothing exports was greater, so the price of this period was in a downward trend.

The US Department of agriculture February Outlook Forum report shows that global cotton production and consumption will increase by 2019/20 in the year of 6.8%, but the growth rate is expected to increase by 6.8%. However, the growth rate of consumption is lower than the long-term mean. The report shows that the cotton output in the United States will increase to 22 million 500 thousand packs in February, thanks to a small increase in planting area, and the yield will drop significantly. The US 2018/19 yield is 25.3%, and the yield of 2019/20 is only 9.3%. India's cotton production forecast for 2019/20 will increase by 1 million 500 thousand to 28 million 500 thousand bales, mainly because cotton production areas in central India are expected to recover from the bad monsoon rains in the 2018 year and increase yields. In May, the USDA supply and demand report raised the global cotton final inventory in 2018/19, and forecast the global cotton production in 2019/20 for the first time to 125 million 450 thousand packages and 7 million 20 thousand packages. On the whole, the trade situation between China and the United States is not optimistic. The increase in the new cotton season is expected to aggravate the pessimism of the market, and the market price has continued to fall sharply in the absence of "weather city". In the past one and a half months, 3 price limits have been harvested, and the uneven spot price decline has led to a sharp rise in the base to a high level, followed by a wide range of shocks and consolidation.

India's monsoon became a reserve force for rising prices.

The monsoon rains in India had landed in June 8th, more than a week later than normal. India's monsoon rains covered more than half of the farmland. The accumulated rainfall exceeded 70% of the annual rainfall. India cotton growers usually began planting after the onset of the monsoon rains. If the initial rainfall during the monsoon season is not enough, seed sowing and crop reduction will be postponed even if the subsequent monsoon rains intensity increases. Last year, the monsoon rains in India continued to be low for second consecutive years. The rainfall before this year is much lower than the normal value. In the IMD5 month, the annual monsoon rain volume is worth 96% in the long term. If the wind and rain in this season are not as good as expected, the market will probably rise.

On the whole, the pessimism caused by loose supply and trade friction and Sino US trade friction has been fully released on the price issue, and the price is supported by demand. However, it should be noted that the United States is currently holding a hearing on public opinion about the 300 billion dollar list of China's exports to the United States plus 25% tariffs. At the end of June, the leaders of the two countries will meet at the G20 summit in Osaka, Japan. Meanwhile, USDA will publish the report on the planting situation, and pay attention to the impact of such events on the price.