G20 Meeting Brings Good News: In The Short Term, The Textile Industry May Return To Its Original Rhythm.

01

Two events boost cotton futures

Two recent important events: the US cotton sowing area and the first meeting of the US dollar are good for the international market, at least on the surface.

The first meeting of the US dollar summit at the G20 summit made the market tense and emotional immediately released. Although the outcome of the meeting was somewhat unexpected among the market participants, cotton futures markets at home and abroad were unable to resist double inflation in early July 1st.

American cotton sown area

According to the report released by the US Department of agriculture in June 28th, the sown area of US cotton in June 28th was 13 million 720 thousand acres, a decrease of 2.7% over the same period last year, and a decrease of 60 thousand acres compared with the end of March. It is concerned about the progress of planting this week in Missouri and Texas.

First meeting of US dollar

In June 29th, the leaders of China and the United States successfully met in Osaka, Japan, and the United States promised not to impose tariffs on the remaining $about 300000000000 of Chinese exports.

During the meeting, the leaders of the two countries met the following important consensus:

Restarting economic and trade consultations on the basis of equality and mutual respect;

The US side said it would no longer impose new tariffs on China's exports.

The two countries' economic and trade teams will discuss specific issues.

02

Cotton price will rebound to 14500-15000 yuan / ton.

This round of rebound, what level can Zheng cotton reach, there are still differences between the outside world, but the view of the rise is almost the same. According to Futures Company professionals, with the release of good news from China and the United States, the rebound height of Zheng cotton should be 14500-15000 yuan / ton, which is the price before negotiation. As part of the tariff of $200 billion has not yet been abolished, the levy rate has not been lowered, so it can not be returned to 15000-16000 yuan / ton for the time being.

As early as May this year, an analysis report of Changjiang futures believed that the global planting area increased gradually over the past three years, and the output went up to a higher level. The global production and marketing gap gradually narrowed, and the supply of cotton in 2018/19 was ample. With the Sino US negotiations, macroeconomic and weather factors, cotton prices in 2019 tended to rise and fall, and the price fluctuation interval was 14000-16500 yuan / ton.

Cotton Corp analysis of spot trading shows that the restart of Sino US trade negotiations should have certain support for exports, but the height of the rebound should be limited, and the rebound height will not exceed 15000 yuan / ton. Because this is back to the fundamentals of reality. At present, even if the export is resumed, a process is needed. It is difficult to digest the stock of cotton resources in the short term in the short term. Once the price rebounded to the expected price range of traders, there will be a hedging sale and a long set of dissolving sets. Judging from the overall situation, Sino US relations are by no means a simple trade dispute, so there is still greater uncertainty in the latter part of the negotiations.

　　 03

In the short term, the textile industry may return to its original rhythm.

According to the results of the first meeting of the US dollar, the United States has promised not to impose new tariffs on Chinese goods, and the two sides will resume economic and trade consultations. The two countries' economic and trade teams will discuss specific issues, and even Trump will allow us companies to sell products to HUAWEI. Admittedly, this is the best result that the market can foresee, and the market has finally breathed a sigh of relief.

For China's cotton textile industry, although everything has not yet been finalized, at least tariffs can finally be temporarily ignored, and the vast majority of textiles and clothing can continue to be exported to the United States. In the short term, the textile industry may return to its original rhythm. It is still possible to win orders and continue to grab exports in the second half of this year. Without the introduction of new tariffs, confidence in domestic and foreign markets will be boosted. In the short term, China's textile and clothing export orders will be stable, and domestic cotton consumption may also increase.

　　 Although the United States no longer imposed new tariffs on Chinese products, but how the tariff has been added, the meeting did not mention that the tariff of the US cotton 25% is still being levied, and whether it can be cancelled will depend on the later consultations. Therefore, the outcome of this meeting is not good for us cotton exports, and China will be cautious about signing the US cotton. At the same time, China's domestic business inventories and port's external cotton stocks are quite adequate. There will be no problems in cotton supply next year. There are no new changes in foreign fundamentals, Chen cotton and new cotton supply, so there will be no obvious changes in the import cotton market.

04

Sino US economic and trade and cotton textile industry still faces challenges.

According to foreign media analysis, because cotton does not have the right to speak at the US government level of cotton, even though China promises to buy large quantities of US agricultural products, it can not guarantee that it will import American cotton. In fact, if there is no specific procurement agreement, China and the United States will repeat the pattern of postponing the purchase and postponing the purchase again, which is the same as last year's meeting in Argentina. Moreover, since the middle of May, the domestic textile industry chain has been hit hard, and it is hard to say how much the market can recover. As a result of this meeting, to a large extent, the Trump administration was under the pressure of all kinds of pressure. Compared with the previous six months, the confrontation between China and the United States has not changed at all and will remain for a long time. Therefore, Sino US economic and trade and cotton textile industry still face enormous challenges and pressures.

Of course, the market is also gradually maturing. Many professionals realize that the increased tariffs have not been cancelled. We should not be blindly optimistic on this point. The Sino US trade relations are full of long-term, complexity and uncertainty. We should make psychological preparations and risk prevention for possible changes. The "Fifth Five Year" barrier of cotton futures is widely recognized as an important point. After all, the road ahead is still full of uncertainties, and the market is likely to change at any time.

　　 There are also people in the industry who believe that under the background of Sino US trade war, market outlook and cotton price trend are unpredictable, but cotton consumption has been growing. From a historical point of view, in 2008-2009 and 2010-2011 years, cotton consumption has recovered rapidly from the crisis two times, and the market downturn may not be long. The key is to see the outcome of Sino US negotiations. For those in the cotton market, it is more important to maintain such an attitude and confidence.