China Cotton Market Weekly (24-28 February 2020)

Foreign epidemic spreads faster, cotton prices reappear panic drops

This week, the number of confirmed cases of new crown pneumonia in China has been decreasing, and the number of enterprises recovering from work has increased. However, the number of confirmed cases in Japan and South Korea has increased significantly, and the international market has fallen again panic. The market is closely monitoring whether the external risk conduction process is over.

First, Zheng cotton futures fell again, and domestic stocks fell sharply.

Despite the recent achievements in domestic epidemic prevention and control, due to the rapid expansion of the number and scope of infection in Japan and South Korea, the US stock market has plummeted, the volatility of the financial market has surged, the international commodity market has been plunged into panic, and domestic and foreign cotton prices have fallen sharply. Zhengzhou cotton futures contract settlement price of 12260 yuan / ton, compared with the previous week fell 1040 yuan / ton, or 7.8%; on behalf of the mainland standard grade lint market price of the national cotton price B index average price of 13282 yuan / ton, compared with the previous week fell 153 yuan / ton, or 1.1%. New York cotton futures contract settlement price of 61.49 cents / pound, compared with the previous week fell 7.51 cents / pound, or 10.9%; The average price of the international cotton index (M), which represents the average price of the imported cotton in China's main port, is 74.80 cents / pound, down 2 cents / pound from the previous week, or 2.6%, and the import cost of the folded renminbi is 12898 yuan / ton (calculated by 1% tariff, including port and freight), which is down 334 yuan / ton compared with the previous week, or 2.5%, and the price difference expanded 181 yuan / ton compared with the previous week.

This week, reserve cotton bid for the maximum price of 13716 yuan / ton. In view of the sharp decline in cotton prices, cotton enterprises will increase their willingness to pay for storage. However, the price difference between domestic and foreign cotton has exceeded 800 yuan / ton for three consecutive days since 26.

According to the national cotton market monitoring system, as of February 28th, the total sale of 5 million 778 thousand tons of seed cotton and lint cotton was reduced by 161 thousand tons as of February 28th. The total output of processing cotton lint was 5 million 722 thousand tons, a decrease of 99 thousand tons compared with that of the previous year, and the processing rate was nearly 99%.

Two, the downstream redevelopment is progressing well and the price difference between inside and outside cotton yarn is widened.

According to the state grid data, the electric power index of Zhejiang textile and machinery manufacturing enterprises rebounded sharply compared with two weeks ago. Recently, the major textile clusters have been opened, and the logistics links in the early stage of the market have improved significantly. The average price of domestic cotton yarn has been raised in the late week, and the difference between the inside and outside cotton yarns has been widened. The conventional yarn is lower than the domestic yarn 101 yuan / ton, and the polyester staple price has dropped by 32 yuan / ton to 6516 yuan / ton.

Three, the policy emphasizes the counter cyclical adjustment of the central bank relay to start financial support.

Recently, general secretary Xi Jinping stressed that macroeconomic policy focuses on countercyclical regulation of the impact of hedging, preventing the economy from slipping out of a reasonable range. The central bank said that the current policy space and tools are adequate, and the next step will be a more flexible monetary policy. China will regularly increase the rediscount and rediscount rate by 500 billion yuan, and reduce the rate of supporting agriculture and small loans to another 0.25 percentage points. In February 27th, the vice governor of the central bank once again said that it should also choose the right direction and reduce the market price of the loan interest rate reform. In the critical period of epidemic prevention and control, the financial and financial integration policies will jointly support enterprises to tide over the difficulties.

Four, outlook for the future

Over the past week, the spread of the epidemic has gradually expanded, and the number of confirmed cases in South Korea, Japan, Italy and Iran has increased dramatically. The number of confirmed cases in Singapore, the United States, Germany and France is also increasing, reaching the second tier. Affected by the epidemic, the market is worried about whether China can fulfill the first phase of Sino US agreement to buy US cotton, which will bring great pressure to the international cotton price. Since late January, sales of domestic textile and apparel lines have basically stagnated, and online sales are also blocked due to logistics reasons. Generally speaking, the favorable factors such as the easing of Sino US trade relations since the Spring Festival, the improvement of China's domestic situation and the support policy of the Chinese government for the resumption of production of enterprises have been inundated by the recent deterioration of the epidemic abroad. Cotton prices at home and abroad will continue to vary with the panic rate of the market.