New Crown Disease Continues To Increase, Cotton Prices Still Lack A Rising Base.

After the signing of the first stage agreement on Sino US trade, Zheng cotton in China ushered in a rebound. Near the Spring Festival, with the end of the replenishment and the spread of the new crown epidemic in China, Zheng cotton prices began to fall. If Zheng cotton prices were repeated in February, then the trend of unilateral downward trend occurred in March after the outbreak of global Qin Qin Yi, and the 05 contract once fell below the threshold of 10000 yuan.

Global economy hits new champions

The director general of the World Health Organization said at the special summit of the group of twenty leaders that the new crown pneumonia is a global crisis and needs global response. He said in April 1st that the new crown pneumonia pandemic has increased exponentially over the past few weeks, with the number of new confirmed cases worldwide reaching 1 million, and more than 50 thousand deaths in the next few days. The number of confirmed cases of new crown pneumonia increased from 100 thousand to 20 days in 11 days; the number of confirmed cases of new crown pneumonia increased from 200 thousand to 30 000 days in 4 days; the number of confirmed diagnosis of new crown pneumonia increased from 700 thousand to 900 thousand for 3 days. According to the latest statistics released by Johns Hopkins University in April 1st, there are more than 900 thousand confirmed cases of new crown pneumonia in the world, and 45 thousand cases died. The newly diagnosed cases of new crown pneumonia in the United States rose to 204 thousand cases and became the first country with more than 200 thousand confirmed cases.

With the intensification of the new crown epidemic overseas, many countries took measures such as city closures and restricted travel. Affected by this, the economies of different countries have been hit to varying degrees. Goldman Sachs said it expects global real GDP to shrink by about 1% in 2020, much larger than the one year after the global financial crisis in 2008. Morgan Stanley warned investors that the new crown pneumonia epidemic is fundamentally disrupting the world economy, and that the global economy is in recession this year, which will be more serious than the global recession in 2001. And this year, global economic growth will slow to 0.9%, the lowest level since the global financial crisis.

Global cotton consumption forecast reduction

In March, the US agriculture report cut the world's cotton consumption by 800 thousand packets by the new crown. Among them, China continued to reduce its consumption forecast by 1 million bales this year. Due to the new crown outbreak, China has substantially accumulated 2 million packages of consumption cuts in two consecutive months. Meanwhile, in March, the US agricultural report reduced China's imports by 250 thousand. In 2019/20, the world's cotton production increased by about 250 thousand bales, and the global end of the month inventory ratio increased by 1 million 300 thousand packs, an increase of 3 million 200 thousand bales compared to the same period last year. The end of the world inventory consumption ratio of cotton was 70.58%, a new high in the past four years, and the end of last year's inventory in China was 10 million 650 thousand tons, a new high in the past 5 years.

In March, the impact of new crown pneumonia on global cotton consumption is still in its early stage. The global market for cotton consumption is expected to continue to be revised this month as the number of confirmed new global pneumonia cases increases and the number of countries to restrict travel to cope with the new crown pneumonia.

Downstream orders missing, stock up

According to customs data, textile exports in China decreased by 19.9% compared with 1-2 in 2020, and garment exports dropped by 20%. According to customs data, in 2019, China exported $76 billion 600 million to Italy, Korea, Japan, France, Germany, the United States, Spain, the United Kingdom, Australia and Holland, accounting for 55% of the total export volume of Chinese clothing. At present, the epidemic situation of these 10 countries is accelerating. At the beginning of this week, domestic yarn and grey fabric utilization rate stabilized, and both stocks began to accumulate. As of yesterday, the number of yarn stocks in China increased by 0.6 days compared with the previous weekend, and the number of grey fabric storage days increased by 0.3 days compared with the previous weekend. Compared with the same period last year, it increased by 6.7 days and 0.9 days respectively.

In the first half of March, a large number of clothing stores in Europe and the United States ceased to open to the outside world. China is the largest exporter of textiles and clothing in the world. Despite the fact that domestic production has basically recovered, export orders have broken down. In the current domestic demand has not yet been restored, part of the cotton mill sales to inventory effect is not good. According to experts, the epidemic in foreign countries may not end until June of this year. This has a negative impact on China's clothing export and cotton consumption. As a result, new orders for textile enterprises are scarce and it is difficult to change in the short term.

US cotton intention area lower than expected

According to the report released by the US Department of agriculture, in 2020, the US cotton planting area was 13 million 703 thousand acres, down 0.3% from the previous year, far below the market expectations. The United States Department of agriculture's Agricultural Outlook Forum predicted that the US cotton planting area in 2020 was 12 million 500 thousand acres, down 9% from the same period last year. The national cotton market monitoring system launched a nationwide cotton planting intention survey in mid March. The results showed that in 2020, China's cotton planting area was 45 million 501 thousand mu, a decrease of 5.1% compared with the same period last year, a decrease of 0.8 percentage points compared with the intention survey results in November 2019. At the end of March, the national development and Reform Commission and the Ministry of Finance jointly issued the notice on cotton target price policy: after the approval of the State Council, the target price policy of cotton was perfected in Xinjiang in 2020, and the target price level was 18600 yuan per ton, every three years. The landing of cotton target price reform policy has played a positive role in stabilizing the sowing area of cotton.

At present, the spring cotton sowing in the northern hemisphere has been launched. Due to the fall in prices and the continuation of the new crown, the sown area is still variable.

When the global economic crisis happened in 2008, Zheng cotton fell by about 35% in the 3-11 months of the year. Compared with the decline alone, the current round of decline has been very close to that year. From the cost of planting, cotton prices have already fallen below the cost price. Nevertheless, we believe that the price of Zheng cotton is still repeating, because the impact of the global new crown pneumonia is still increasing.