Weak Demand For Downstream, Zheng Cotton Is Short.

The recent Sino US trade negotiations have added more waves, the domestic purchasing and storage policy boots are down, the new cotton production forecast has been lowered, and the news is frequent, but the market reaction is mediocre. The quantity of the cotton warehouse receipt and the downstream yarn stock all reach the highest value in the same period of history, which effectively suppress the disk formation.

The policy of collection and storage is reproduced. In November 14th, the joint Ministry of finance of the State Grain and Material Reserve announced that in order to strengthen the management of central reserve cotton, further optimize the reserve structure and improve the quality of reserves, it was decided to enter some new territories cotton, and the rotation time was from December 2, 2019 to March 31, 2020. The total volume of rotation was about 500 thousand tons, and the daily auction was about 7000 tons. At the same time, this round of entry has also made clear provisions on quality, that is, the delivery level and above.

In the past 12 years, there have been 4 rounds of entry at the national level, from October 2008 to April 2009, with a total volume of 2 million 790 thousand tons; from September 2011 to March 2012, the total volume of 4 million 550 thousand tons was transferred; from September 2012 to March 2013, the total volume was 6 million 670 thousand tons; from September 2012 to March 2013, the total volume was 6 million 600 thousand tons. As of November 25, 2019, the difference between domestic and foreign cotton prices was 529 yuan / ton, the lowest level in nearly 5 years.

At the end of 2013/2014, state storage cotton stocks reached the highest level of 10 million 950 thousand tons. In 2015, the state cancelled the purchase and storage of cotton, and began to vigorously store and stock the stocks. As of September 30, 2019, the state reserve stocks only had less than 1 million 500 thousand tons. If the future storage and storage capacity was 500 thousand tons, by the end of 2019/2020, the stock of state reserves would be less than 2 million tons, which is still far below the 3 million tons of national storage stock safety line recognized by the industry. Therefore, this purchase and storage may stimulate enthusiasm, but in fact, it has limited influence on the fundamentals of cotton and should not be read over.

New cotton production is expected to be cut in China. The cotton production survey was carried out nationwide in 15 to 30 October. The survey results showed that in 2019, the average output per unit area of cotton in China was 121.9 kg / mu, a decrease of 3.7% over the same period last year, which was 5.1 percentage points lower than that in August. According to the monitoring system, the total area of 5 million 843 thousand tons was estimated to be 4.3%, down by 5.1 percentage points compared with August.

It is estimated that the average cotton production per unit area in Xinjiang will be 140.9 kg / mu in 2019, down 4.6% from the same period last year. The total output is expected to be 4 million 974 thousand tons, down 2.5% from the same period last year, which is 5.5 percentage points lower than that predicted in August.

Cotton and yarn stocks are all in the same historical highs. Cotton inventory has been at a high level for the past year, and commercial inventories in October were 3 million 220 thousand tons, an increase of 8.4% over the same period last year, an increase of 46.4% over the previous year, the highest in the past 10 years. In addition, since the beginning of 2018, the number of warehouse receipts in Zheng cotton has been accumulating and has reached a new high, reaching the extreme value since the listing of Zheng cotton in May 2019, reaching more than 20 thousand hands. In early November, new cotton was listed in large quantities, and the new cotton warehouse receipt was accumulated again. As of November 25, 2019, the number of warehouse receipts was 15787, with 5268 effective forecasts and 21055 total.

Yarn inventory directly affects downstream cotton purchasing. Since May, the passive storage of yarn has obviously accelerated and has been soaring all the way. With the arrival of the traditional peak season of textile industry, the speed of yarn de stocking began to accelerate in October. As at the end of October, yarn inventory was 27.16 days, a decrease of 8% compared to the same period, an increase of 26% over the same period last year.

In short, the domestic news is frequent, but Zheng cotton "calm" to face, no surprise, the core problem lies in the weak demand for downstream. Textile traditional peak season is coming to an end, zhengmian is difficult to do. Technically, there is a great pressure on the top of zhengmian.