Cotton Market Forecast In December: Complex External Environment, Rising Cotton Prices And Limited Kinetic Energy.

At the end of 2019, the international economic and trade situation is still grim, and uncertainties are intertwined. With the new cotton harvest coming to an end, supply reached the highest level in the year, and the downstream textile market situation is obviously worse than in previous years. Near the Spring Festival, the market gradually entered the rhythm of the holiday.

First, the external environment is complex and uncertain.

Sino US trade friction lasted for nearly two years. The adverse effects of trade friction on the US economy were further revealed. In the second quarter and the third quarter of 2019, the GDP growth rate of the United States dropped to 2% and 2.1% respectively. The world bank estimated that if the Sino US trade disputes did not end as soon as possible, the economic growth of the United States would linger around 2% or even lower in the next few years. Although the Sino US agreement on economic and trade agreement reached the first stage, the details of the agreement have not yet been announced. In the late stage, with the further weakness of the US economy and the white hot stage of the US general election in 2020, the progress of the future negotiations will be faced with uncertainty due to the changes in the US general election and the trend of the US economy. In the absence of the expected benefits, the United States constantly adjusts its strategy and puts pressure on China through political pressure. Recently, the US Senate passed the so-called "Hongkong human rights and Democracy Act", the US House of Representatives passed the "Uighur human rights policy act of 2019" and the US Navy ship's entry into the South China Sea and the technical sanctions against HUAWEI. All indications show that the United States has a clear intention to curb China's development. It can not rule out the possibility of future currency wars and other conflicts on the basis of current trade wars and science and technology wars. The market will face many risks, including commodities such as cotton, which are difficult to be independent. It is recommended that the entities should prepare for a protracted war.

Two, 2019/20 global cotton supply and demand relationship is relatively loose, China's production and demand gap narrowed.

Since 2019, cotton production has been growing well in the northern hemisphere, and cotton production has increased. Due to trade friction, global cotton consumption has been declining and China's production and demand gap has narrowed. According to the US Department of agriculture's December report, the world's cotton production in 2019/20 increased by 26 million 368 thousand tons, an increase of 2.55% over the same period last year, and the global cotton consumption of 26 million 186 thousand tons, down 0.02% from the same period last year. This is the first time the US Department of agriculture has adjusted consumption to a decline this year, and the world's output is more than 182 thousand tons. According to the national cotton market monitoring system data, China's cotton output in 2019/20 was 5 million 843 thousand tons, down 4.29% from the same period last year, and consumption was 7 million 588 thousand and 900 tons, down 5% compared with the same period last year, and the gap between production and demand was 1 million 745 thousand and 900 tons, narrowing 137 thousand and 400 tons compared with last year. Since December, the supply and demand relationship in the northern hemisphere is expected to be loosely balanced in the short term as the new cotton market in the northern hemisphere reaches a high level and consumption is weak.

Three, cotton textile industry chain transmission kinetic energy is insufficient, cotton price continues to rise kinetic energy is limited.

After October 2019, the optimistic expectations of Sino US trade negotiations promoted a slight improvement in the cotton textile market atmosphere, but the transmission of the industrial chain was not smooth, and the downstream textile market was significantly weaker than in previous years. As of December 17, 2019, the futures price of zhengmian increased by 10.14% compared with the beginning of October, and the spot price of lint rose 5.32%, cotton yarn rose only 0.62%, cotton cloth fell 1.84%. The price difference of yarn cotton and gauze narrowed, and the profits of enterprises decreased. According to the statistics of National Bureau of statistics, the total profit of textile enterprises above Designated Size reached 6.4% in the 1-10 months compared with the same period last year. At the end of the year, the enterprises will return the funds as soon as possible at the end of the year, and increase the stock price of yarn and cloth. According to the national cotton market monitoring system survey, in the early December, the yarn production and sales rate of the enterprises surveyed by the survey decreased by 0.8 percentage points, and the inventory of pure cotton cloth was higher than the average level of 13.3 days in the past three years. Textile enterprises raw materials procurement rhythm slowed down, in early December, sampling survey to prepare for the purchase of cotton enterprises accounted for a decrease of 4.9 percentage points. Later, as the new year approached, the spot market will enter the rhythm of the holiday before the Spring Festival. The risk in the futures market is still relatively large. As of December 17, 2019, the 871 thousand and 800 main positions in the main cotton contract of zhengmian, the 967 thousand and 500 tons of warehouse receipts, all reached the peak of history.

Four, planning cotton planting intentions next year on the agenda.

With the end of the cotton harvest in the northern hemisphere in 2018/19, the planned cotton planting area next year will gradually be put on the agenda. The National Cotton Association of the United States (NCC) generally released the new annual cotton planting area survey results in February. Therefore, from mid December 2019 to mid January 2020, the trend of ICE cotton price and other grain price trends will have an impact on the US cotton planting intention in the next year. The current trade dispute is unfavorable for the US cotton planting. The minimum purchase policy of India 2018/19 supports the trend of India cotton prices being strong. The cotton cotton planting intention of the next year may be relatively optimistic. 2019 is the last year of the "three years" implementation period of China's Xinjiang cotton price target. It is not clear how the late stage policy will be formulated, and the cotton growers are waiting to wait and see. According to the preliminary investigation of the national cotton market monitoring system, it is estimated that the cotton planting area in Xinjiang will be 34 million 926 thousand and 600 mu in 2020, a decrease of 1.1% compared with 2019, an increase of 1.03% over 2018. In view of the support policy of cotton producing countries to cotton production, the cotton planting intention of the next year will probably be narrowed slightly, and the final cotton planting area will be affected by the cotton price trend in the next stage.

Five, domestic cotton production and marketing forecast

The forecast table of production and storage is not adjusted.