ICE US Cotton Futures Market Innovation Low, Zheng Cotton Will Be Affected By Its Trend?

Recently, ICE's US cotton futures market has been developing at a low level. The main trading area in December is between 61.71-63.18 cents / pound and the lowest level since May 2016. Yesterday, the main CF1909 of zhengmian futures also broke down the 13000 yuan / ton mark, which seemed to be dragged down by the external market. After all, the internal and external linkage is still strong. Then how does Zheng cotton go? The most important factor is the need to pay attention to the main factors that affect their respective trends.

Last week, the US Department of agriculture's July forecast of production and demand increased the initial inventory and ending inventory of 2019/20 cotton in the period of the year of 350 thousand (at the beginning of the year, the stock was adjusted by an increase of 300 thousand packages, and the final inventory was increased by 300 thousand packages). At the same time, the global initial inventory and ending inventory in 2019/20 were also adjusted. At the beginning, the inventory was adjusted by 1 million 700 thousand packages, the consumption volume was reduced by 1 million packets, and the final inventory increased by 3 million 200 thousand packages. In addition, this week's strong U.S. dollar and the healthy growth of US cotton and other factors, and investors' worries about the progress of Sino US trade, have played a catalytic role in weakening the external market. In the absence of favorable factors, the focus of the external market continues to explore, making the pessimistic atmosphere of the international market more intense. So, in the short term, unless the other parts of the US cotton delta are hit by hurricanes, rainstorms or Sino US negotiations, the ICE disk will continue to be vulnerable.

Similarly, for Zheng cotton, the recent rebound in short and short positions will be insufficient, and the fundamentals will be restricted. At present, Xinjiang's cotton stock is still over 2 million tons, much higher than that of the same period last year. Moreover, a large part of lint is still non guaranteed resources. According to the feedback from some cotton enterprises in Xinjiang, because of the limited funds of some small enterprises, it is difficult to implement hedging. On the other hand, this year, Zheng cotton fell sharply, and cotton prices have fallen below the cost line before the cotton enterprises have yet to catch up. Today, the spot can not move, futures can not be set up, so that some ginning mills and traders are in a dilemma.

In addition, after the G20 meeting between China and the US, economic and trade consultations between the two sides have not made substantial progress. Although the downstream textile enterprises have improved their yarns, they still worry about the future market and dare not rush to replenishment. Therefore, demand has not improved significantly since the early stage. According to the recent research on importing cotton enterprises in Qingdao port and Guangdong port, there are many downstream queries, but the actual turnover is very small. Some small trading enterprises said that because of their own funds and other reasons, nor did they carry out hedging, the sale of resources are mostly fixed price spot, and can not accept the low price competition in the market. In late July, they will stop taking orders and wait for the arrival of the traditional peak season in 8 and September.

To sum up, the downstream textile enterprises are not enthusiastic in purchasing raw cotton, and demand will remain in the off-season. Sino US economic and trade consultations are advancing slowly and investors are cautious in their operation. Therefore, in the short term, Zheng cotton or maintain shock finishing, still need to pay attention to macro news and market demand changes, as well as the influence of the outward trend.