Cotton Price Support Gradually Showed Signs Of Stabilization

Entering the November, with cotton harvest entering the peak period, the processing of new cotton gradually accelerated, and the reduction of market output was expected to gradually weaken. At the same time, Sino US trade consultation also appeared uncertainty to suppress market sentiment. Cotton prices began to weaken. But in December, with the launching of the national cotton store and the progress of Sino US trade negotiations, cotton showed signs of stabilization.

With regard to this year's cotton production, after 4-5 months of sowing and seedling production reduction, 7-8 months of growth and growth expectations, and 9-10 months of harvest reduction, the prediction of cotton yield has gradually become clear along with the promotion of new flower harvesting and processing. Although the new flower began to be listed in the early days of October, the market generally expected to have a substantial reduction in production. At that time, the statistics showed that the output of the northern Xinjiang was generally reduced by 50 kg / mu. The farmers in southern Xinjiang except for Bazhou's Yuli also generally indicated a reduction in production. The yield per unit area decreased by 50-100 kg / mu, mainly due to the decrease in the amount of flowers collected by farmers. The acquisition process of the ginning mill was much slower than the same period in previous years. But after the cotton harvest processing entered the peak period, cotton processing capacity quickly surpassed the level of last year. As of December 3rd, the total cotton processing volume in Xinjiang area was 3 million 602 thousand and 200 tons, an increase of 1.4% over the same period last year. At the same time, the market is expected to gradually reduce production, the national cotton monitoring system at the end of October survey data show that in 2019 China's cotton production is expected to be 5 million 843 thousand tons, down 4.3% over the same period last year. Although the specific output still needs to be determined according to the data of public inspection, but it can be relatively determined that this year's cotton production is not expected to fluctuate very high and the probability of high yield is not large.

In November 14th, the State Grain and material reserve bureau and the Ministry of Finance issued a notice on strengthening the management of central reserve cotton, further optimizing the reserve structure and improving the quality of reserves, and decided to enter part of Xinjiang cotton. The rotation time was from December 2, 2019 to March 31, 2020, and the total amount was 500 thousand tons, and the daily auction was about 7000 tons. The launch of the national cotton store was launched last week, and the market reaction was relatively positive. Last week, the plan entered 35 thousand tons and actually entered 23 thousand and 480 tons. The turnover rate was 67%, and the average price was 13205 yuan / ton. Although the probability of continuing to turn out next year may still be large, in the short term, Xinjiang cotton will undoubtedly ease the pressure of supply and demand on the new downstream demand of new flower concentrate, which has greatly supported cotton prices. In addition, although the weather factor has little effect on cotton production this year, the impact on cotton quality is very large. On the basis of public inspection data, cotton length, strength and horse value in North and South Xinjiang have declined significantly compared with the previous two years, while the demand for cotton quality is higher in the national storage ring, which further supports the cotton price formation.

With regard to downstream consumption, under the pressure of macroeconomic growth and trade friction, exports and domestic sales of textile and clothing have been in a state of weakness since the end of last year. However, China's textile and apparel exports to the US account for 0.25 percentage points of its textile and clothing exports in the past 1-9 months, and the impact of trade frictions is relatively limited. What's more, the slowdown in demand caused by the macroeconomic downturn is relatively limited. At the end of the year, it is the off-season of textile industry, and the order of enterprises is generally less than that of previous years. But in terms of yarn prosperity index, although this year has been low, it has basically stabilized in recent months. In addition, trade frictions have limited impact on textile exports, but there is no doubt that the impact on market sentiment is very large. So although trade frictions have been going on for nearly two years, the market is still extremely sensitive to their reactions. At present, although Sino US trade negotiations are still uncertain, the overall market is improving, and the market is beginning to warm up to its expectations, which has made emotional support for cotton prices.

Therefore, despite the continued weakening of demand for cotton and new flowers, pressure on commercial and industrial inventories and the pressure of warehouse receipts, cotton stocks have been gradually reduced, and market sentiment has gradually changed.