Will Cotton Prices Meet 10 Thousand?

Since the outbreak of the new crown, cotton prices have gone out of the unilateral downward trend under the dual impact of domestic shock therapy and the stagnation of foreign demand. During the Saudi Arabia and Russia crude oil price war, crude oil prices fell below 30 US dollars / barrel, directly driving the prices of chemical fiber raw materials to drop sharply and putting pressure on the cotton market. In the current context, can cotton prices meet 10 thousand?

First, review the low points in the cotton market

Since the launch of cotton futures in 2004, there have been two hits of 10 thousand, one in 2008 and one in 2016. Tracing back to China's cotton circulation system reform in late twentieth Century, the lowest price of cotton appeared in 2001, reaching 8000 yuan / ton. The three low price of cotton faces different macro and industrial backgrounds.

1, 2001

At the macro level, the global economic growth is slowing down when the Internet bubble bursts and the US 9.11 event. At the industry level, China further promotes the reform of the cotton circulation system, and the resultant force of cotton production is in line with the old cotton auction.

2, 2008

At the macro level, the subprime mortgage crisis triggered the global financial tsunami and the global economic growth rate declined. At the industry level, the overheated economy in 2007 led to an increase in output and a decline in consumption.

3, 2016

At the macro level, China's supply side reform is "three down, one subsidy and one subsidy", and the quantity growth has turned to quality growth. At the industry level, the huge amount of reserve cotton is out of storage, and the linkage between internal and external cotton prices has dropped, logic and consumption are pessimistic.

Two, can you say goodbye to 10 thousand in 2020?

Facing the macro background in 2020: the global economic growth is weak, the United Kingdom takes off the burden of Europe, and the United States puts pressure on China to try to keep the position of "big boss". Saudi Arabia and Russia's crude oil prices struggle to keep the market share; the new crown epidemic situation "domestic singing and foreign debut" has become a worldwide outbreak of infectious diseases, giving the global economy a heavy blow; the US stock trend is intuitively reflected. The impact of several years of accumulated conflicts on the global economy after being pierced by the new crown epidemic.

The current industry background is: the global cotton production is high in 2019/20, and consumption is hit by the Sino US trade war and the new crown epidemic.

The Sino US trade war dominated the 6-12 month fall in 2019. After the short rebound, the Spring Festival in 2020 was again dominated by the new crown. Then, when the cotton price falls under the new crown epidemic situation, when will it stop?

Personally, the cotton market is likely to be broken in the past 7-8 years. If the bottom appears in 2020, it may not appear in the first half of the year, but it does not exclude the rising stage. The driving factor is the demand retaliatory rebound after the end of the epidemic.

From the industry perspective, USDA's latest data show that the world's cotton consumption is 25 million 730 thousand tons, the global cotton output is 26 million 470 thousand tons, and the global cotton supply exceeds demand. Assuming that foreign countries are similar to China's epidemic prevention and control cycle, the epidemic will lead to 2 months of global consumption, which will reduce the consumption of about 4 million 290 thousand tons, intensify the supply of cotton in the world, and increase the ratio of cotton to sink to 93.3%, next to the peak value of 102% in 2016.

From the policy point of view, the delay, suspension, volume and shrinkage of the incoming rounds are the most effective means to reverse the supply and demand pattern of the circulation market. On March 17th, at the press conference of the national development and Reform Commission, Li Hui, deputy director of the Comprehensive Development Department of the national development and Reform Commission, said that the next step is to strengthen the prevention and control of epidemic situation, and orderly restore the order of normal production and life, strengthen the measures of "six stability", pay attention to the combination of long and short term, implement precise policies, and make full use of the momentum so as to fully release the great potential and powerful kinetic energy of China's development. "Our country's policy tools are still adequate. We will closely monitor the economic situation and make timely implementation of the relevant reserve policies according to the needs of the development of the situation, increase the intensity of the policy and strive to minimize the impact of the epidemic, and accomplish the goal and goal of building a well-off society in an all-round way."

From the perspective of risk, the stock market, crude oil, epidemic situation and so on are eyeful, but profits are also constantly brewing, locust disaster, climate anomalies, low price suppression supply.

The increase in cotton prices needs reduction as the most direct driving force, either from the shrinking of the area or by the reduction of the yield per unit area. Therefore, from the perspective of suppressing supply, the low price of cotton may appear after the 2020 acquisition season. At present, we have entered the low price area, short selling is risky, we must be patient and patient.