Zhang Wenmin: Sino US Talks Will Bring Three Trends To Zheng Cotton.

The cotton market has been very lively recently. Not only has the Sino US economic and trade consultations made substantial progress, but also the central cotton reserve policy has finally landed. Of course, there are still many factors that will cause the rise in cotton prices. In order to let the clouds see the sun and analyze the reasons behind the current market fluctuations, China cotton net reporter interviewed Zhang Wenmin, a senior consultant of the New Cotton Futures Co., Ltd., a senior consultant in Zhengzhou business.

Reporter: now cotton harvest is coming to an end. It is generally reflected that cotton production in Xinjiang is decreasing. According to your field research, how about cotton output and quality in Xinjiang this year?

Zhang Wenmin: From October 27th to November 3rd, I participated in the "large scale research group on cotton production and purchase in southern Xinjiang" organized by the Zhengzhou commodity exchange and the China cotton storage information center, and made extensive and on-the-spot investigation and Research on the cotton planting area, output, picking progress, acquisition processing, lint sales, market prices and trends in the southern Xinjiang, and obtained a lot of first-hand information. Combined with more than 10-11 months of incomplete statistics, it is estimated that Xinjiang's cotton output will reach 460-500 tons, with a reduction of 5-8% or more. The main reasons for the decrease in cotton production in Xinjiang in 2019/20 are as follows:

First, in the 4-6 month, the southern and Northern Xinjiang were generally continuous low temperature and rainy, and the seedlings were rotten and rotten. At the end of September, the temperature dropped to 6-8 degrees in the northern Xinjiang. Cotton stopped growing, and frosting in the middle and October was 15-25 days ahead of schedule. The southern Xinjiang also experienced the unusual climate of low temperature and rainy weather, so the yield of the seed cotton in the northern Xinjiang was reduced by 40-80 kg from 350-400 kg / mu last year.

The two is the reduction in the quantity of cotton flowing into local ginning plants this year, resulting in a reduction of 10-20% in the purchase of seed cotton in local counties and ginning plants.

Three, the proportion of excellent cotton varieties in some prefectures and counties and regiments decreased sharply, resulting in a double decline in yield and quality. The length, fracture ratio and micron value were far lower than those of last year. In 2018, the "double 29" main producing area reached "double 28" this year, which is not easy.

Reporter: what do you think are the main factors that affect the market?

Zhang Wenmin: There are many factors that affect the rise and fall of cotton, such as supply and demand, cotton reserves, import volume, carry over stock, futures option hedging, seed cotton and lint price, and cotton production, supply and marketing relationship. The main concern is whether the Sino US economic and trade negotiations can reach a stage or final bilateral agreement, especially if the US side requires us to import $400-500 billion in agricultural products, and whether it can contain 100-300 million tons of imported cotton in the three year period.

Reporter: what are the characteristics of cotton prices in Xinjiang in 2019?

Zhang Wenmin: In the South and North Xinjiang, the price of local cotton and the sale price of lint gradually decreased, but affected by the easing of Sino US trade friction and the reduction of cotton production in Xinjiang, the purchase price of machine picked cotton in South and North Xinjiang gradually increased to 4.6-5.9 yuan / kg (the initial price of 4.35-5.6 yuan / kg), and the hand picked cotton rose to 5.3-6.5 yuan / kg (the initial price of the purchase was 5.0-6.0 yuan / kg). Although the price of the 2001 phase of zhengmian rose from 11970 yuan / ton to 13200 yuan / ton, it is still difficult to change the reality of the upside down price of Xinjiang cotton futures, and the cotton enterprises with 12000-12600 yuan / ton futures sold at the early stage have already lost 500-1000 yuan or more. At present, most cotton and textile enterprises believe that cotton prices will rise to more than 13600-14000 yuan / ton to make small profits.

Reporter: how should we view the impact of Sino US economic and trade negotiations on cotton prices at this stage? ?

Zhang Wenmin: There are three possible trends in Sino US trade war. Trend 1: if the Sino US economic and trade talks break down and the confrontation between the two sides intensifies, the United States will increase taxes on China's 2500-5000 billion dollars. China will no longer import American cotton, and export of textile and clothing will decrease sharply. The price of cotton futures will continue to fall below 11000-12000 yuan / ton.

Trend two: Sino US economic and trade negotiations have made progress, but there are still big differences. It is difficult to reach a stage or final bilateral agreement in the near future, and the cotton futures market will continue to maintain low volatility.

Trend three: if the Sino US economic and trade negotiations reach a bilateral agreement at last, China will import 200-300 tons of US cotton and make ICE futures up 5-15 cents / pound. The price of zhengmian will also rise to 13500-14500 yuan / ton. The surplus of Xinjiang's 50-100 million tons is sold out, and the sales of new cotton will improve in the new year. Cotton textile reserves increased to 3-6 months, cotton, cotton yarn, textile and clothing market prices will rise.

Reporter: last Thursday, the state authorities announced the 500 thousand ton of cotton in the market. What's the impact on the market price?

Zhang Wenmin: In November 14th, the national competent authorities issued a circular of 500 thousand tons of Xinjiang cotton: "about 7000 tons per day, according to the top price of the auction," the expected price of 12700-13200 yuan will be entered. The machine picked cotton will be the main force in the northern Xinjiang. The size of the 500 thousand ton round and the impact on the market price trend are relatively limited, but it may be the first drill for increasing the number of rounds in the future. In the current Sino US trade negotiations have not yet been determined whether it is possible to import large quantities of cotton in the United States, the state will not increase the number of cotton entering Xinjiang in the near future. It will depend on the quantity of imported cotton. China now has limited reserve cotton, an annual average consumption of 700-750 tons, and the reserves of 300-400 tons can reach the national cotton safety reserve line. China needs to take an active part in the international and domestic cotton market and explore a low risk and high efficiency integrated mode to stabilize market prices.

Reporter: according to the trend of registered warehouse receipts, Zheng cotton warehouse list will remain high this year. Do you think it represents a weak market?

Zhang Wenmin: This year, the futures warehouse warehouse cotton has reached the highest number of 90-120 tons. In Xinjiang, Zheng has set up 8 delivery warehouses, 1 million 800 thousand tons of static storage capacity, and 22 warehouses in the mainland. In 2019, it will continue to grow to a larger scale. It will change the way of business management, innovation, high efficiency and low risk. Xinjiang vigorously develops the textile and garment industry. Now there are more than 1800-2000 spindles of cotton spinning spindles and 1 million 500 thousand tons of Xinjiang textile cotton. The direct docking between cotton and textile enterprises will become an innovative and efficient form of new financing loans and transaction deliveries this year. With the widespread spread of cotton futures price model, base trading, financing loans, warehouse receipt pledge loans, futures options hedging and other business models, the upstream cotton trade between Xinjiang and the mainland textile trading enterprises will be effectively docked, and the cotton futures warehouse receipts maintained by 100-200 yuan will be the normal number in the coming years. For example, if Sino US economic and trade negotiations reach a bilateral agreement in the end, they will import 200-300 tons of quantity of cotton and cotton, so that ICE futures will rise 5-15 cents, and cotton futures warehouse receipts will be digested in large quantities. In the future, cotton sales will be converted into spot, futures, reserve and import diversified business structure in the spot market, and the turnover volume of cotton futures will reach 200-300 tons in 2019-2022.