Speculation On Cotton Market Trend After G20 Summit

At the G20 summit over the weekend, the heads of state of China and the United States agreed to restart economic and trade negotiations on the basis of equality and mutual respect. The US side will not impose new tariffs on the other 300 billion US dollars of Chinese products. China has agreed to purchase American agricultural products immediately. Beyond the market expectations, the short-term benefits, Sino US trade negotiations back to the original point when the break-up on May 11. Will Zheng Mian's main force return to more than 15000 yuan / ton when it broke down on May 11?

In fact, the United States is more concerned about short-term cotton imports.

According to the report released by the U.S. Department of agriculture on June 28, the actual planting area of cotton in the United States in 2019 is 13.72 million mu, a year-on-year decrease of 2.7%, 60000 acres less than the intended area at the end of March. Pay attention to the planting progress of Missouri and Texas this week. In 2019 / 20, the variable of cotton yield in the United States is transferred to the rate of abandonment. Judging from the current excellent rate, as of June 23, the excellent rate of American cotton was 50%, last week 49%, and the same period last year was 42%. Except for California, the overall excellent rate is higher. However, the US cotton shipment is lower than the market expectation, and the subsequent demand support of American cotton is limited, which is the main focus of the short-term market. As of the week of June 20, the cumulative shipment of American cotton in 18 / 19 was 2.7 million tons (USDA monthly report estimated export of 3.21 million tons), and the shipment progress was 84%. The sales cycle of American cotton in 2018 / 19 was only 6 weeks, and the average weekly shipment should be 85000 tons, and the weekly shipment volume in the last two weeks was 7.7 About 10000 tons, the shipment is lower than the market expectation, increasing the initial inventory of American cotton in 2019 / 20. However, due to the high cotton tail sales in the United States, India's cotton mills are facing the situation of high cotton tail sales in 2018.

In the short term, the macro economy has boosted the industry, but the capacity and elasticity of downstream demand side are limited.

According to tteb news, the spot price of cotton rose by about 100 yuan / ton last week, showing the advantage of buy it now price, and the transaction is better than the point price. Textile enterprises cotton procurement is still more cautious. Under the influence of this situation, the pure cotton yarn market has improved, and the inventory level of textile enterprises has declined for two consecutive weeks and is still at a high level. The loss of yarn stock in the mill is about 500-1000 yuan / ton, and immediate purchase is profitable. At present, the downstream demand is weak, and the speed of weaving mills and traders is slow, and the digestion speed of grey cloth is lower than the production speed. The short-term macro positive will boost the industry's forecast. We should pay attention to whether some export orders are implemented in advance. The inventory of the industrial chain is high (especially the cloth factory inventory is still under great pressure), and the sales elasticity is limited. At the end of 2018 / 19, the circulating inventory increased by 400000 tons on a year-on-year basis. Once the futures price rebounded sharply, it would also face the pressure of 1.5 million tons cotton hedging in southern Xinjiang.

To sum up, we believe that the situation of Sino US talks at the G20 summit is better than market expectations. Sino US trade negotiations return to the origin of May 11, bringing benefits to industry and capital in the short term. However, the capacity and flexibility of downstream demand side is limited, which is weaker than that in early May. In the short term, it is more psychological boost for us cotton. The actual import trade needs to be paid attention to. It is estimated that the short-term contract of Zhengzhou cotton cf1909 will run between 13900-14500 yuan / ton.