International Cotton Price Quotation Analysis: Ideal Is Very Plentiful, Reality Is Very Skinny.

A spokesman for the Ministry of Commerce said on July 25th, "to implement the important consensus reached between the two heads of state, the leaders of the Sino US trade negotiations will meet in Shanghai on from July 30th to 31st and hold the twelfth round of Sino US economic and trade consultations on the basis of equality and mutual respect". This shows that the Sino US trade consultation is taking a step forward in Osaka.

The USDA report shows that in the week of 12-18 July 2019, the net contract volume of the US cotton exports in July 2019 is 37 thousand tons, which is significantly larger than the average value of the previous week and the first four weeks. Especially, it is worth noting that Chinese enterprises have again asked for and signed 2019/20 cotton. Under the influence of favorable overlay, the main contract of ICE cotton futures has broken down 63, 64 and other integer points recently, and agencies, cotton related enterprises and investors have been relieved. According to CFTC statistics, buyers signed the 19/20 cotton ON-CAll contract for a larger proportion. As of July 18th, the ON-CALL point price contract was about 76 thousand and 400, indicating that the buyers were not optimistic about the ICE far month contract.

From ICE day trading volume, position and additional positions are low (see only 9055 hands in July 25th), ICE technology rebound conditions are not mature, there is still lack of funds, fundamentals and other coordination. The author estimates that at present, ICE futures are almost eyeful in addition to Sino US trade negotiations. Therefore, the main contract will encounter strong obstruction in the 65-67 cents / pound interval, and 8/9 month is still "easy to fall and difficult to rise" market.

First, the US cotton medium long line is bad. USDA production report shows that as of July 21, 2019, the cotton bud rate in the United States was 78%, an increase of 1 percentage points over the same period last year. The growth rate of cotton in the United States reached 60% above the same period last year, an increase of 21 percentage points over the same period last year. Therefore, the probability of "double harvest" in the 2019/20 cotton production and quality increased in the year of USDA; the August report of the United States is likely to continue to raise the US cotton output and the end inventory and reduce the global cotton consumption;

Second, whether China and the US can achieve positive progress in trade negotiations remains largely uncertain. Although China and the United States have resumed consultations after a lapse of 2 months, the parties expect that China and the US will face tough negotiations. China calls for an equal dialogue and a realistic solution to the problems in bilateral trade so that both sides can benefit from it. The US side still hopes to maximize China's concessions through tariffs and other leverage. Therefore, the short-term US side may still adopt the strategy of "carrot + Stick", while the Chinese side will resolutely give "hit the bullet", and the negotiations are restarted, but the obvious progress is not easy.

Thirdly, once the UK is hard to get rid of Europe, its impact on global economic recovery and growth can not be underestimated. A series of recent data shows that the British economy is facing a severe test. In June, manufacturing, service and comprehensive PMI in the UK were not as good as expected, of which PMI index of manufacturing industry was 48, and Boris Johnson won the new Conservative leader as he won the conservative party election in July 23rd. In the industry analysis, the emergence of "hard off Europe" will have a significant negative impact on the economy and market in the UK and Europe, and the impact on the UK may be even greater.

Fourthly, the growth of global cotton consumption will be significantly lower than that of USDA, ICAC and other institutions. As the Sino US trade frictions intensified in 2019 and tariffs were imposed on each other, Chinese enterprises' growth in imports of cotton, yarns, garments and other countries in India, Vietnam, Pakistan, Indonesia and other countries declined rapidly. At present, most of the cotton mills in Southeast Asia have finished high inventory, and the rate of starting up has continued to decline, and cotton consumption demand has been reduced by "cliff style". The direct result is that Vietnam, India and other countries have sharply slowed down the growth of the signing import of 2018/19 cotton and 2019/20 cotton.