Tang Zhen: Osaka Meeting Market To Ease Negotiations On Cotton Futures Trend

Zheng cotton futures in May, after Trump changed his face to increase tariffs and led to a fall in the market, finally reached the bottom of the stage in early June. The main CF1909 contract was the lowest in June 10th to 12720 yuan / ton, and then came out of a wave of more than one thousand points of the rebound, which can be said to give the market a little comfort. In particular, the good news released by the G20 summit in Osaka made the market close to the daily trading limit in July 1st, and Mo Feizheng cotton futures have really been successful. Does cotton price see the dawn of dawn? The author believes that before the Sino US negotiations have not yet reached a clear conclusion, it seems too early to conclude this conclusion.

First of all, let's review the cotton market in five or six. In 2019, after the launch of the cotton reserve, the market supply increased. As Trump ordered us to raise tariffs to 200 billion of China's exports to the United States to 25%, the cotton market fell from 15500 yuan / ton. The biggest drop is more than 2500 points, the lowest drop below 13000 yuan / ton, which has experienced three downtime boards. We can see that the macro negative events have a great impact on cotton, the spot market has been unsalable, the downstream textile enterprises have been shrinking sharply, and the industry has indeed experienced a very difficult stage. After the price reached 13000 yuan / ton, we only increased the tariff from the biggest bad event. From 10% to 25%, the rate of increase was 15%. However, from 15500 yuan / ton to 13000 yuan / ton, the decrease was also about 15%. In short, 200 billion of the negative factors have basically been exhausted. Historically, the position of 13000 yuan / ton has obvious technical support. The rebound is a certain reaction to the market. At the end of June, the G20 summit market was extremely concerned. With the advance agreement of the first meeting of the US dollar in Osaka, favorable atmosphere encouraged the market to continue to rebound, and speculative funds also had some involvement in pushing the market to break through 14000 yuan / ton, showing a return to the current stage.

Secondly, the trend of the analysis is still inseparable from the status quo of the fundamentals, and any message must be reflected by the fundamentals. It is understood that in June, cotton and cotton yarns were gradually exported and cotton yarn stocks were consumed. But the main reason is selling at a reduced price. Cotton yarn profits have shrunk considerably. Cotton purchasing is mostly based on passive passive replenishment, and the industry has not improved significantly in large areas. In addition, the author visited the southern Xinjiang cotton region in May and learned that the cotton growth is generally good. Although the weather is affected by the weather in the early stage, the overall impact is weaker than that of the previous year. It is expected that the cotton production in Xinjiang will be higher than that of last year when there are no major problems. If the weather is good, the yield is expected to continue to increase. In terms of inventory, it can be said that the quantity of cotton in Xinjiang is still large. In the early June, the domestic commercial inventory data was 3 million 520 thousand tons. The US Department of agriculture's data have increased production in recent two months, which is obviously greater than consumption. So the supply and demand situation is not optimistic from the present to the future. If the market is really good, it is necessary to restore confidence and speed up inventory.

Once again, the result of the Osaka meeting is considered neutral preference, at least once again to curb the continued deterioration of Sino US trade war. But from the White House's meeting statement, the market must remain vigilant. The 325 billion yuan tariff will not be added for a while. Negotiations can continue and can not be concluded. I believe that the resumption of Sino US talks at this meeting, the new tariff temporarily can not play a role in the bottom market, but the bad news has not changed before, the market seems to have not enough convincing. The future trend of Sino US negotiations still needs to be continued.

To sum up, Zheng cotton market has its demand for rebound in technology. Based on fundamentals, it can not be overly optimistic. Based on macro policy, there is still huge uncertainty in the market outlook. It is expected that in the short and medium term, the trend of the cotton market will go out of an interval adjustment trend, waiting for the further development of Sino US negotiations, and the trend or clarity of the Sino US trade negotiations will also move the market up or down further. For the cotton industry, it is necessary to adopt different coping strategies according to the situation in which they are located. It is a better strategy to sell more short-term stocks and sell short term options against spot financial losses. The most uncertain market is to consider avoiding insurance by buying insurance strategy. The short positions on hand can be intervened in a small amount, but the risk can not be ignored. In particular, the black swan event in May should give the market a big wake-up call. Speculation is mainly based on band, and profits will be snooed for safety in the near future.