Lack Of Downstream Demand And Rising Cotton Prices

During the Mid Autumn Festival, China and the United States released goodwill to each other, and trade relations showed signs of relaxation. Domestic and foreign related commodities fluctuated greatly. ICE cotton cotton rose more than 4% on that day.

Sino US mutual interpretation goodwill, trade relations mitigation

On the day before the Mid Autumn Festival, the president of the United States said that the time to raise tariffs on the 250 billion Mai yuan Chinese exports to the United States was postponed from October 1st to October 15th. On the same day, at the regular press conference held by the Ministry of Commerce, the United States announced that it would postpone the issue of adding tariffs on Chinese goods. The spokesman said that the Chinese side welcomed the goodwill action released by the US side, and Chinese enterprises had begun to inquire about the purchase of US agricultural products. The Chinese side said that from now on, in accordance with the principles of marketization and WTO rules, a certain quantity of soybeans, pork and other agricultural products will be purchased from the United States. The Customs Tariff Commission of the State Council will impose tariffs on these purchases.

Prior to the thirteenth Sino US trade consultation, China and the United States released goodwill to each other and brought the market up. Despite no mention of cotton in the article, trade relations between China and the United States eased and expected to boost domestic and foreign markets. Last Friday, ICE cotton rose more than 4%; last Monday, domestic cotton jumped sharply.

USDA reduces US cotton production and increases global end inventory.

Due to the decrease in production in Southwest China, in September, the US agricultural report reduced the estimated output of US cotton production by 654 thousand bales. At the same time, the export volume was estimated to be reduced by 700 thousand packages and offset each other.

The US cotton production forecast is basically in line with market expectations. Before, because of the remarkable decline in the growth rate of the US cotton, the market expects the US agricultural supply and demand report in September or the US cotton production forecast will be reduced. As of September 15, 2019, the growth rate of cotton in the United States reached 41%, a decrease of 2 percentage points from the previous week, an increase of 2 percentage points over the same period last year. The excellent and good growth rate of American cotton has declined for two consecutive weeks.

On the global side, the inventory ratio increased at the beginning of the year, and the consumption forecast decreased more than the output forecast. Finally, the 2019/2020 cotton futures inventory forecast increased by 1 million 300 thousand packs in the end of the year. The reduction in cotton production estimates in the US and Australia has been offset by an increase in India's cotton production forecast. The global cotton production is projected to be reduced by 709 thousand packs. Global cotton consumption is projected to be reduced by 1 million 330 thousand packs by China, India, Brazil, Vietnam and the US consumption forecast. Among them, China's cotton consumption is estimated to be reduced by 500 thousand packages.

Cotton storage is coming to an end.

On the 19 day, China Cotton Reserve Management Co., Ltd. plans to sell and store 11 thousand and 900 tons of cotton reserves, and the actual turnover is 11 thousand and 800 tons, with a turnover rate of 99.18%. The average price of the transaction was 12160 yuan / ton, up 106 yuan / ton compared with the previous trading day, and the price of 3128B was 13297 yuan / ton, up 76 yuan / ton compared with the previous day.

From May 5th to September 19th, the total planned storage of cotton reserves was 1 million 70 thousand and 600 tons, and the actual turnover was 920 thousand and 800 tons, with a turnover rate of 86.01%. According to the structure, the total turnover of real estate cotton is about 420 thousand tons, and the average transaction price is 12446 yuan / ton. The total turnover of Xinjiang cotton is 500 thousand tons, and the turnover rate is 93%. The average transaction price is 12866 yuan / ton.

Judging from the recent situation of reserve cotton rotation, the daily listing volume is basically stable, and the proportion of Xinjiang cotton has dropped slightly. Due to the close of the end, and the advantage of the reserve cotton is still in price. Despite the slight fall in Xinjiang cotton proportion, the turnover rate of reserve cotton remained high, almost 100%. At the same time, the increase rate of real estate cotton and Xinjiang cotton also increased significantly. On the 19 day, the increase rate of real estate cotton was 456 yuan / ton, and the increase rate of Xinjiang cotton was 1119 yuan / ton. After the rise of the price of cotton and cotton, the average price of the reserve cotton throwing and storing business has a strong upward trend.

The average price of dumping and storage will follow Zheng cotton's recovery.

Price increase of real estate cotton and Xinjiang cotton

Downstream demand is better than the same period in previous years.

Since the late August, the operating rate of yarn and grey fabric has gradually increased in China. According to China cotton information network data, in August 2019, China's cotton textile industry purchasing managers index (PMI) was 42.67%, an increase of 0.37 percentage points, a slight rise in orders, an increase of 1.61 percentage points for the 38.71. ring ratio.

Due to the Sino US economic and trade frictions and the global macroeconomic impact, the long term haze of domestic textile downstream has been alleviated by the influence of gold nine silver ten. But compared with the same period in previous years, demand for cotton textile industry is obviously weak this year. In August, cotton textile PMI decreased by 5.21 percentage points in the past five years, a decrease of 5.21 percentage points compared with the same period last year, and the new order index was also the lowest in nearly five years, a drop of 13.34 percentage points over the same period last year. In terms of operating rate, as of now, the load index of cotton mill has dropped 12.6 percentage points year-on-year, and the load index of grey fabric factory has dropped 5.7 percentage points year-on-year.

In terms of inventory, after a series of price promotions and a wave of replenishment, the stock of cotton yarn decreased significantly. As of last week, the cotton yarn inventory index was 22.9 days, a decrease of 3.5 days in the month, an increase of 8.7 days compared with the same period last year. It is reported that the inventory of factory screening has increased significantly recently. As a result of the peak season of consumption, the inventory of cloth factories also decreased significantly. As of last week, the inventory index of grey fabrics decreased by 2 days on a month by month, and increased by 3.6 days compared with the same period last year.

Cotton spinning PMI less than the same period in previous years

The new order index increased slightly, down sharply from the same period last year.

At present, the new cotton has been listed. This year, the price of Xinjiang started to decrease significantly compared with that of last year, which is in line with market expectations. The price of seed cotton has risen slightly after the recent rise in the price of Zheng cotton, and the total purchase amount is small. There is a certain gap between the purchase price of cotton mill and the psychological expectation of cotton farmers. The release of cotton reserves is coming to an end, basically achieving the target of 1 million tons of delivery, and the entry of later cotton reserves will be one of the focuses of the market. At this stage, domestic cotton supply is adequate, downstream orders are weak, and overall demand is weak. Cotton spinning enterprises are still mainly relying on lower inventory, and raw materials are purchased quickly and quickly with the finished products.