Trade Friction To Ease The Superposition Of Xinjiang'S Output Will Drive Cotton Prices To Rebound.

Since the late August, when the author published the report of "the long night is almost finished, waiting for the dawn", there has been no major deviation in the basic logic. In October, the market came to Xinjiang cotton production reduction news; 11, the thirteenth round of Sino US high-level economic and trade consultations initially reached the "first stage" trade agreement, the Sino US trade friction phased mitigation; macro and industrial superposition, will drive the cotton price rebound continued.

First, Sino US trade friction phased mitigation.

On the 10-11 day of October, the thirteenth round of high-level Sino US economic and trade consultations initially reached the "first stage" trade agreement, and it may be formally signed in November 16th during the APEC summit in Chile. China and the United States have made substantial progress in the fields of agriculture, intellectual property protection, exchange rate, financial services, expanding trade cooperation, technology transfer and dispute settlement. The US suspended its tariffs on China's $250 billion products in October 15th and maintained 25% tariffs. China will buy about 400-500 billion dollars worth of agricultural products. The Sino US trade frictions will be phased down, which will help domestic and foreign cotton prices rebound.

In 2017, China imported US $24 billion 80 million of US agricultural products, of which US cotton was US $980 million (506 thousand tons). This time, the Chinese side will purchase some $400-500 billion worth of agricultural products. If the average value is 45 billion US dollars, the US cotton will need to import 1 billion 830 million US dollars. The price will be converted to about 1 million 30 thousand tons according to the current 1% tariff price. In October, USDA estimated that the US cotton end inventory of 2019/20 will be 1 million 524 thousand tons in the year of 2019/20. China has signed 400 thousand tons of 2019/20 cotton (shipment 36 thousand tons). If China buys another 1 million 30 thousand tons of cotton, it will effectively reduce the end of US cotton stocks, which is conducive to the rebound of US cotton prices.

The United States is the largest exporter of cotton, China is the largest exporter of textile and clothing, and the two are important destinations for each other. Trade disputes are the core factors that can not be avoided in the cotton market. The volume of the downstream is much larger than that of the upstream. After repeated games, the logic of the impact of trade disputes on cotton prices has been solidified by market participants as "more profits and less profits". At present, the latest impact of trade disputes on the cotton market has three points: (1) the US $250 billion tax rate on goods exported to the United States is currently maintained at 25%, affecting the US cotton imports and about 17% textile exports to the United States; (2) since September 1st, 15% tariffs have been imposed on US $300 billion exports to the United States, and some commodities (including clothing, shoes and caps) have been postponed to December 15th, affecting most of the remaining textile and apparel exports to the United States; (3) from December 15th, the import tariffs will be adjusted to 30% from the current 25%; after October 11th, China will purchase about $18 billion worth of agricultural products, and is expected to exempt from levying tariffs. At this point, the tax threat of trade disputes has covered all exports to the US textile and apparel industry. The ultimate estimate is that if the market is completely lost, domestic cotton consumption will drop by 80-100 tons. At the emotional level, the market has already carried out a relatively full transaction on the worst case. The thirteenth round of high-level Sino US economic and trade consultations initially reached the "first stage" trade agreement, and the trading logic of "more profits but less profits" will drive the rebound of cotton prices at home and abroad. However, due to the long-term nature and complexity of trade frictions, we must guard against its repeatability. At present, the drive for profit is only limited to the emotional level, which is defined as the rebound market. If we want to turn into reverse, we need to see that the downstream consumption data is getting better and better. This needs to be verified gradually in the future market.

Two, Xinjiang cotton production, seed cotton prices rise, the new flower hedging center of gravity move upward

As of October 11th, cotton processing capacity in Xinjiang was 364 thousand tons, of which 246 thousand tons and 118 thousand tons. Along with harvesting and processing, Xinjiang cotton production has been continuously reported, and lint yield has been estimated to be reduced from about 5 million 170 thousand tons to about 5 million tons. Among them, the cotton information network reduced the output of Xinjiang cotton to 5 million 7 thousand tons, down 3.2% from the same period last year. Market rumors that the production rate in Northern Xinjiang is over 10%, and the southern Xinjiang has also cut production. It will not rule out the possibility of further downgrading of Xinjiang's output. Xinjiang's production reduction overlapped with China US trade frictions, and the market mentality was optimistic. The price of seed cotton started to rise continuously, and the cost of new flower production increased. In October 12th, the average price of hand picked cotton seed in Xinjiang was about 5.56 yuan / kg, and the discount of lint cotton was about 12750 yuan / ton. The cost of folding CF2001 was about 12850 yuan / ton, the price of Xinjiang seed picked cotton was 5.04 yuan / kg, and the price of cotton seed was about 12390 yuan / ton. The rate of CF2001 was about 12490 yuan per ton, and the cost of machine picked cotton rose by 1165 yuan / ton last week. In the middle reaches, after the end of the national cotton store, the market is expected to strengthen the entry of national cotton reserves. The author expects that 100-150 million tons of cotton will be transferred to the market, and the probability of entering the cotton market will be greater. Downstream, to maintain the "finished high inventory, raw materials weak replenishment" state, slightly improved from the link, the pressure from the year-on-year is still large, the peak season performance is lower than expected. According to the national cotton market monitoring system, as early as the beginning of October, the average daily use of cotton in the sample survey enterprises was about 28.1 days (including the quantity of imported cotton), an increase of 0.5 days, a decrease of 11.6 days compared with that of the previous year, 63.8% of the enterprises preparing to purchase cotton, an increase of 9.4 percentage points, an increase of 0.9 percentage points compared to the same period last year, and a 27.1 day sale of yarn inventory, a 1.6 day reduction in the chain, an increase of 8.6 days compared with the same period last year.

To sum up, the Sino US trade friction has been phased out, the US cotton export expectations and global consumer sentiment have improved, superimposed on the domestic cotton production reduction expectations in Xinjiang, the seed cotton purchase price has been rising, lifting the new flower hedging center of gravity, the pattern of maintaining Zheng cotton shock bottomed judgement, the current market quality is temporarily defined as a rebound, and the CF2001 rebound target is near 13500 yuan / ton. If the rebound can turn into a reverse, it is necessary to track downstream consumption data. If it continues to improve, there may be a trend of upward trend of development; if consumption does not match, the rebound is highly limited.