Uncertainty In The Certainty Of Cotton Market

In the futures market, when any price is low, the theory of empty talk will be out of tune. Especially in the cotton market carrying countless people's speculative dreams, after all, the cotton market has never been short of expectations for the big market, but the more we do this, the more we need to keep thinking, and rationally analyze the core cause of the current situation of the cotton market.

Reduction of production is expected to ferment, Zheng cotton crossing the pass.

The new cotton harvest is coming. Quarterly, for the bullish funds, North Xinjiang production is gradually landing is the top card. Starting from this year's cotton planting, regardless of the planting area, or the forecast of the unit yield, the market is more consistent with the new year's output expectations, with a slight increase or decrease. But from the post harvest market, the expected reduction in production in North Xinjiang is gradually emerging. According to the content of a conference last week, the 10-15% reduction in Northern Xinjiang is mainly concentrated in Changji, Shihezi and Kuitun.

Although no specific data have been confirmed, there are a few clues from the public inspection data: at the end of October last year, the total volume of public inspection in Xinjiang amounted to 1 million 148 thousand and 400 tons. As of October 31st this year, the volume of public inspection in Xinjiang was 1 million 43 thousand and 300 tons, which was reduced by 100 thousand tons compared with the same period last year. Therefore, from the point of view of public inspection data, the reduction of production is expected to be confirmed, but it is too early to conclude.

According to the front-line research, the processing enterprises actually saw the phenomenon of reduction in production, but the reason for this phenomenon may be that cotton farmers are reluctant to sell, and the purchase process of the cotton mill is slower than the same period. Cotton farmers do not sell cotton seeds at the same plant, they transmit information about their own production, and expand the illusion of reducing production.

With the expected increase in production, seed cotton began to appear in the "V" type reverse, and the lint cost index gradually increased. Superimposed on the recent downstream products to pick up the stock market, pessimism and other factors to be buoyant, Zheng cotton market to meet more frequently, bullish mood is better, the main contract price successfully surpassed the 13000 yuan / ton mark. On the trend, Zheng cotton index broke through the 60 day moving average, which is forming a reversal trend. In terms of market sentiment, from a variety of investors' exchange situation, low price cotton attracts eyeballs, investors do more enthusiasm, and capital admission has pushed the position to a new high in nearly a year, which is close to historical highs. In view of this, the dispute between the two sides is still very big for the current price of Zheng cotton, and the market is entering the stage of the immortal fight.

Optimism is good, risk still exists.

Although the current accumulation of large numbers of days and places, but with the base further down, optimism has been digested by the market. Over the past year or so, long overturned on cotton has nothing more than simply summed up cotton in agricultural products, thinking only on the supply side. And when the market again focuses on the supply side of cotton, will bulls again ignore the demand side's impact on prices? After all, to solve the bell, it is still necessary for people to tie up the bell. Cotton needs weaken and the giant pit is destroyed.

There are two main points of view on cotton demand in the future: first, the outward transfer of textile industry is a major phenomenon in recent years. Behind it, it also reflects the loss of some advantages of the textile industry in the context of environmental pressure and rising labor costs. After all, the cost of cotton yarn as a staple goods is an important reference for weaving mills. Therefore, in recent years, because of the low import threshold of domestic cotton yarn, the impact of external yarn is obvious, and the demand for domestic cotton is restrained. However, we must know that 70% of the cost of cotton yarn depends on the price of raw material cotton. Under the weak and strong cotton price pattern, it is more conducive to the return of some cotton yarn orders in Southeast Asia to China. Therefore, we should maintain an optimistic attitude towards domestic cotton demand in the future.

Comparison of cotton price difference between inside and outside

Futures market is expected to be quite important, but market expectations are also erroneous. At present, the most important point is that the market is wrong about cotton demand. Tariff increases have made the order of China's cotton textile products to reduce sharply, resulting in a decline in demand for cotton. However, tariff increases and demand reductions are not directly related to past data.

As of August 2019, the actual export volume of China's cotton textile exports to the United States was not significantly reduced. In the statistics of all imported cotton textiles in the United States, goods from China always occupy the 30-35% status. This is further explained: 1, the degree of previous tariff increases did not lead to the shrinking of Chinese cotton textile orders, and even if the subsequent trade relations eased, the abolition of retaliatory tariffs would not obviously bring new orders in the United States. 2, there were other reasons for the domestic cotton demand. We notice that China's clothing exports are flagging. Among them, Europe, Japan, China, Hongkong and Canada have been shrinking to varying degrees. That is to say, under the downward pressure of the global macro-economy, the demand for cotton textile clothing is weakening, which is likely to continue in the future.

To sum up, there are huge uncertainties in the cotton market's certainty opportunities for low price cotton. The uncertainty comes mainly from two expected differences: 1, is there a reduction in production? In terms of supply and demand pattern, is it important to reduce production? 2, can trade relations improve the demand for cotton? But for the industry, especially the cotton processing industry, the risk is still in the first place. Industry is not speculation, cash flow is more important than income. It is suggested that cotton ginning plants should follow the market to buy cotton, seize the opportunity of lower base, sell hedging, and lock in profits.