Zheng Cotton Market Trend Is Extremely Early.

In recent years, Zheng cotton's volatility has increased, and it has effectively broken through the previous platform under the impetus of capital and brought up the volume upside down, which has aroused strong concern in the market. Starting from the fundamentals of cotton, considering the future cotton planting intention, cotton inventory and downstream yarn production and inventory, I believe that Zheng cotton has not been able to see the clouds.

Domestic cotton planting intention declined year by year

The national cotton market monitoring system launched a nationwide survey on cotton planting intentions in mid and late 11 last year, involving 15 provinces (autonomous regions), 50 cotton planting counties (cities, farms), and more than 1895 designated cotton planting information contact households. The survey showed that in 2020, the cotton planting area was 45 million 875 thousand mu, a decrease of 2 million 68 thousand mu compared with the same period.

The cotton planting area in northwest inland cotton area is 35 million 205 thousand mu, down 1.3% compared with the same period last year. Among them, Xinjiang intends to plant cotton area of 34 million 927 thousand mu, down 1.1% compared to the same period. The cotton planting area in the middle and lower reaches of the Yangtze River is about 3 million 947 thousand mu, down 19.5% from the same period last year. The Yellow River basin intends to cotton planting area of 6 million 348 thousand mu, down 8.2% over the same period last year.

There are two main reasons for the decline in cotton planting intention: first, the decline in seed cotton purchase price has led to cotton farmers' enthusiasm for planting cotton. According to the national cotton market monitoring system data, as of November 30, 2019, the average price of seed cotton purchase fell by 12.5% in 2019/2020 compared with the same period last year, and the average purchase price of seed cotton in Xinjiang dropped by 23.9%. Two, the late stage policy is not yet clear. In 2019, the last year of Xinjiang cotton target price subsidy was implemented in the "three years". The late policy is not clear, and it also has certain influence on cotton growers' cotton planting enthusiasm.

In general, as long as there is no significant decline in cotton planting intentions in Xinjiang, domestic output will eventually be relatively stable.

Serious polarization of cotton stocks

Over the past two years, cotton warehouse receipts have been growing rapidly. Since November 2019, the growth rate of warehouse receipts has increased significantly. As of December 31, 2019, the number of registered warehouse receipts by Zheng merchants was 26591, effective 6503 were forecast, the total amount of warehouse receipts was 33094, and it was equivalent to about 1 million 320 thousand tons of Zheng cotton spot, which is the highest value of Zheng Miancang's single data and is in the process of continued growth. Some people in the industry speculated that the total volume of warehouse receipts could reach a maximum of 35 thousand historical levels, and the spot market will be as high as 1 million 400 thousand tons, accounting for about 24% of the new cotton output in 2019/2020. Therefore, the pressure of warehouse receipts on the disk can not be ignored.

In addition, cotton business inventories in November 2019 were about 4 million 500 thousand tons, an increase of 5.48% over the same period last year, an increase of 39.46% over the past 10 years, the highest in the past 10 years. At the same time, the cotton industry inventory in December 2019 was only 27.4 days, a decrease of 27.13% compared with the same period last year, and a decrease of 4.53%, the lowest in the last 5 years.

It can be seen that at present, cotton is concentrated in the hands of cotton ginning factories and traders. The raw material inventory of cotton mill is very low. If the future cotton mill does not actively replenish raw materials inventory, then the momentum of Zheng cotton's continuous upward breakthrough is not enough, short or will come back again.

Yarn production decreased, inventory high

In November 2019, the national yarn production was 2 million 614 thousand tons, a year-on-year decrease of 4.18%, an increase of 5.11% in the ring ratio, and a total of 22 million 436 thousand tons of yarn production from 1 to November, a decrease of 13.68% over the same period last year. In 2018, the national yarn production was 28 million 658 thousand tons, a decrease of 22.37% over the same period last year. It can be seen from the trend of the annual yield of the yarn that there is a clear downward trend. In November 2019, domestic yarn inventory was 23.87 days, an increase of 20.3% over the same period, a decrease of 12.1% compared to the same period.

To sum up, in 2020, the survey results on the decline of cotton planting area in China had a limited impact on the fundamentals of cotton. At present, cotton warehouse receipts and commercial inventories are in the same period of nearly 5 years, while industrial inventories are at a low level in the same historical period. At the same time, the yarn production is declining, and the inventory of enterprises is high. This indicates that the downstream demand is weak, and the window period of traditional textile holiday is coming. From a technical point of view, Zheng cotton's short term rapid pull up is not easy to catch up.