Short Term Zheng Cotton Futures Upward Trend Is Highly Restricted.

At present, Xinjiang seed cotton purchase price continues to rise, cottonseed drop larger, the cost of cotton mill is rising, there is a strong cost support at the bottom of Zheng Mian, and imported cotton has been upside down, in the long run, it is conducive to domestic cotton inventory. However, domestic cotton carry over inventory is still high, and downstream terminal procurement demand is still weak. In addition, the uncertainty of Sino US economic and trade consultations has led to short-term uplink height restriction.

Stage easing of Sino US economic and trade consultations

* this year, according to the needs of domestic market and the principle of marketization, Chinese enterprises imported a certain scale of agricultural products from the United States, mainly including 20 million tons of soybeans, 700 thousand tons of pork, 700 thousand tons of sorghum, 230 thousand tons of wheat and 320 thousand tons of cotton. According to past data, the amount of agricultural products imported from the United States reached a peak of 29 billion dollars in 2013, but in 2018, under Trump's tariff policy, this figure was only $9 billion, and it would be very difficult to reach 50 billion dollars.

A spokesman for the Ministry of Commerce said at a regular press conference held on 17, that the position, principles and objectives of Sino US economic and trade consultations have never changed. The ultimate goal of the two sides' consultations is to stop trade frictions and cancel all tariffs, which is beneficial to China, to Yu Meiguo and to the whole world. It is hoped that the two sides will continue to work together to promote negotiations, reach a phased agreement as early as possible, and make new progress in the issue of tariff cancellation.

Sino US economic and trade consultations have far-reaching impact on the export of US cotton and the export of Chinese textiles. Although the current easing is conducive to improving market sentiment, the medium-term market is still cautious.

North Jiangsu ginning factory costs continue to rise

According to the recent survey of Northern Xinjiang, although the cotton planting area increased slightly in North Xinjiang, the yield per unit area decreased more. The ginning plant generally reflected that the reduction in yield per unit area was about 20%. It is understood that the initial purchase price of seed cotton is generally low, the purchase price is between 4 and 4.5 yuan / kg, but due to the different reasons of local and regiment subsidies, the floating range of the purchase price is relatively large. Recently, the seed cotton purchase price of 40 of the lint has risen to 5 yuan / kg, and the cotton seed price has dropped considerably, resulting in the increase of lint costs in the cotton mill. In addition, due to the low cost of cotton hedging in the early stage, Zheng cotton experienced a wave of decline in late September, but at present the low hedging pressure is relatively small, and the rise in the purchase price limits the low level of hedging pressure. Therefore, Zheng cotton has strong support in the vicinity of the former low, and the probability of a new low price is relatively small.

At the same time, the spot price of cotton has also risen in recent years, and 1% of the imported cotton is in an upside down state. In the short term, the impact of imported cotton is not great. If the price difference between home and abroad is in an upside down state for a long time, it will help domestic cotton to go out of stock, which will also provide some support for domestic cotton prices.

Downstream terminal procurement demand is weak.

The operation rate of downstream weaving mills and textile enterprises is still low, and the inventory of cotton enterprises in textile enterprises is low, purchasing demand is poor, yarn stock is high, showing weak demand, and the weaving mill also presents the characteristics of low yarn stock and high inventory of grey cloth. At present, the lower reaches of cotton tend to be cautious in purchasing, most of which are bought and sold, and the willingness to replenishment is poor. If the Sino US relations are further improved and demand rebounded, the situation will be improved.

Based on the above analysis, on the one hand, Sino US economic and trade consultations have made phased progress, which is conducive to the improvement of market sentiment. However, the market can still be cautious when the market sentiment is finally improved. On the other hand, the cotton production in Xinjiang is expected to decrease in the new year, but the production rate varies greatly. At the same time, the price of seed cotton has increased more and the pressure of the market has been reduced. In this context, I believe that short-term Zheng cotton or maintain low-level oscillation, if the Sino US relations continue to improve in the late period, to maximize domestic cotton inventory digestion and demand for improvement, Zheng cotton can open up space.