Macro Market Sentiment Improves, Inside And Outside Cotton Price Difference Is Expected To Narrow

Last week, ICE cotton was boosted by the monthly supply and demand report of USDA and Sino US trade expectations. The center of the futures price rose more obviously. The average price of the US cotton main contract was 66.23 cents / pound, up 1.42 cents / pound compared with the previous week, or 2.19%. The average price of the cotton spot price index (A) in the international market was 75.46 cents / pound, up 1.41 cents / lb compared with the previous week, or 1.90%, and the cost of import of RMB was 12842 yuan / ton, up 240 yuan per ton, or 1.90%.

Last week, the average price of cotton spot price index in the domestic market was 13162 yuan / ton (China cotton price index (3128B variety) and national cotton price index (3128B) arithmetic average), up 107 yuan / ton, or 0.82%.

By comparing cotton prices at home and abroad, it can be seen clearly: last week, the international cotton prices rose by a higher margin than that in China. According to the formula of the central cotton reserve, the average price difference between cotton and domestic cotton last week was 320 yuan / ton, and the reduction was 133 yuan / ton.

On the evening of December 13th, China held a press conference to issue a statement on China's first stage economic and trade agreement between China and the United States. The two sides reached an agreement. The US side will fulfill the relevant commitments to phasing out tariffs on Chinese products at a phased stage, so as to achieve a shift from the increase in tariffs to the fall in tariffs. The US USTR statement states that the United States will maintain a 25% tariff on Chinese imports worth about US $250 billion, but will reduce tariffs on other Chinese imports valued at US $120 billion to about 7.5%. The two sides postponed the planned tariff increase of December 15th.

I believe that the market tension has been alleviated, and the domestic market's influence on the good news in China and the United States is still strong. According to the trend of Zheng cotton today, domestic cotton prices have not risen, and the market is still skeptical about whether the downstream demand can recover. Compared with the continued downturn in the domestic downstream, the annual export situation of US cotton is better than that of last year. In addition, according to relevant media sources, China has promised to buy US $40 billion US agricultural products in 2020, and increase US $200 billion in two years. If the information is true, US agricultural products will be further boosted. Therefore, it is expected that the cotton trade will be stronger or stronger in the near future.

With the first phase of Sino US agreement landing, cotton prices both at home and abroad will be boosted, but whether the supply and demand structure of domestic fundamentals can get better will lead to the final trend of cotton market. And the trend of foreign cotton market is stronger than that in China, and the price gap between inside and outside is expected to be further narrowed. This will help downstream cotton selection to tilt to the domestic market. Cotton prices or slow oscillations upward in the future market, as for the rise, we still need to observe the market mentality and cotton actual digestion.