Global Consumption Is Dropping Sharply, Falling And Looking Forward To The Turning Point. When Will Cotton Bottom Go?

In 2020, I am afraid no industry is facing huge uncertainties due to the impact of the new crown epidemic. Cotton is also an important raw material for textile industry.

Since the first quarter of 2020, the price of US cotton, Zheng cotton and Zheng cotton yarn has plunged, leaving the two digit cliff type decline, and the current downward trend is still not optimistic. The drop in cotton prices is naturally related to the lack of demand for textile enterprises currently plagued by the "withdrawal" problem, and the downward trend in cotton farmers' intentions towards cotton farmers is down. The global cotton industry chain is shrouded in the shadow of the new crown epidemic, and it is not clear when it will clear up.

Supply side

When is the awkward inventory moving?

Stocks are abundant but there are few transactions.

Just like what we are experiencing at the moment, the new crown outbreak occurred in 1 and February of 2020, and most of the domestic textile enterprises stopped production to cope with the epidemic situation. In the late February, enterprises began to resume production and resumed production in the second half of the year, and basically resumed production in the middle of March. However, from the end of February to the beginning of March, the mainland continued to erupt. From Asia, Japan, Japan and Iran to Europe and then to North America, recently, South America and Africa also began to increase. A seemingly global outbreak is coming.

Galaxy futures Liu Qiannan told reporters: "affected by the epidemic throughout the first quarter cotton consumption is expected to be poor. Since the first quarter, the US cotton main contract has fallen to 50.68 cents / pound from the highest point of 71.96 cents / pound, or 30%, and the main contract of zhengmian has fallen from the highest point 14450 yuan / ton to the lowest point 10570 yuan / ton, or 27%, and the main contract price of zhengmian yarn has fallen from the highest point of 22460 yuan / ton to the lowest point 17670 yuan / ton, a decrease of 21.3%. The cotton market in the first quarter witnessed a big outbreak at home and abroad. It experienced a plague of locusts, and experienced a huge oil slump. It experienced a big crash in the US and Europe, and the price of cotton fell sharply.

It is reported that the current cotton business inventory is adequate. The Logistics Association of China Cotton Association surveyed 152 cotton deliveries and warehouses, social warehouses, bonded area warehouses and processing enterprise warehouses in 18 provinces and municipalities nationwide. By the end of February, the total volume of cotton business inventories in the whole country was about 4 million 972 thousand and 600 tons, down 39 thousand and 300 tons from last month, 407 thousand and 400 tons higher than the same period last year.

However, in February, affected by the new crown epidemic situation, domestic cotton spot trading basically stagnated, textile enterprises started to start in late February, but they still consumed their own stocks of textile enterprises.

Import demand reduction

Reserve cotton is still uncertain.

On the import side, Liu Qiannan said: "due to the impact of the epidemic, cotton import data have not yet been released, but in our view, the current outbreak of epidemics abroad is expected to be very difficult to control. In the two quarter, the demand for cotton in the entire textile industry will be reduced by the impact of foreign epidemic. Meanwhile, domestic cotton consumption will also be affected. Overall, the demand for imported cotton is expected to be. Greatly reduced. "

There is another factor that can not be ignored in cotton supply. As we all know, the storage of cotton starting in December 2019 is a temporary purchase and storage restart in the past six years, aimed at strengthening the management of central reserve cotton, further optimizing the reserve structure and improving the quality of reserves. To this end, Liu Qiannan said: "from December 2, 2019 cotton reserve to March 31st, it lasted for 4 months. The planned purchase volume of the reserve cotton wheel was 786 thousand tons, and the total actual turnover was 371 thousand and 600 tons, accounting for 47% of the planned purchase volume. Judging from the total volume of cotton imports, about 300000 tons of reserve cotton have little impact on the market. But at present, domestic cotton prices have plummeted, and many enterprises are losing money. Under the premise of considering the stability of the overall situation, the state does not exclude that the future countries will continue to rotate cotton in order to alleviate the pressure of enterprises, thus supporting cotton prices.

The intention of planting cotton is decreasing, and spring ploughing is in order.

The decline in cotton prices will directly lead to a decline in cotton planting intention. At the end of February 2020, the cotton association of China conducted third surveys on the area of cotton planting intention in 2425 provinces in the 12 provinces and municipalities in the mainland and in Xinjiang autonomous region in 2020. The results showed that the cotton planting area in 2020 was 45 million 735 thousand and 700 mu, down 5.03% from the same period last year. The Yangtze River Basin is affected by epidemic situation, and there are many factors that affect cotton planting area, especially in Hubei province. According to incomplete statistics, the intended area of cotton planting in the basin was 4 million 449 thousand and 100 mu, a decrease of 9.93% over the same period last year, an increase of 4.6 percentage points, of which Hubei's cotton planting intention dropped by 14.53%.

In a situation where everything seems pessimistic, the effective control of China's domestic epidemic makes the current spring ploughing farming in an orderly way, and this has become a good medicine for the cotton market at present. Liu Qiannan said: "with the gradual warming of the temperature, most parts of the country have resumed work and resumed production. The spring sowing and preparation work is moving forward in an orderly way. Among them, the spring sowing in Xinjiang cotton area has been postponed, but the overall preparation work is orderly. The southern Xinjiang cotton region is uniformly arranged by the government to guide the spring irrigation. The agricultural production in the the Yellow River River Basin has basically recovered, and farmers can go to the farm to work and purchase agricultural materials.

Demand side

Terminal transmission is worrying both at home and abroad.

As textile raw materials, the current shortage of textile enterprises directly affects the demand of the entire cotton market. Liu Qiannan said: "1, February, affected by the domestic epidemic, the textile enterprises have delayed the construction on average for about a month, and many enterprises are also running at a low start-up rate at the beginning of the operation. Therefore, it is expected that the domestic epidemic will affect the direct consumption of cotton in a month to a month and a half. With the outbreak of the international epidemic in March, export orders began to be affected. It is difficult to control the epidemic situation abroad for a short time. We expect that the export orders will not be good in the two quarter, which will have a great impact on the consumption of terminal textiles and garments.

In addition, Liu Qiannan also said: "the epidemic will have a very big impact on the global economy, and the global GDP growth rate is expected to decline, and the magnitude of the decline will depend on the control of overseas epidemic. The decline of global economic growth will also be a great pressure on textile clothing with larger consumption elasticity.

According to the latest statistics of the General Administration of Customs of China, the export volume of textiles and clothing in China in 2020 1-2 was 29 billion 835 million US dollars, down 20% from the same period last year. Among them, exports of textiles (including textile yarns, fabrics and articles) amounted to US $13 billion 773 million, down 19.9% compared to the same period last year. Exports of garments (including garments and accessories) were US $16 billion 62 million, down 20% from the same period last year. Liu Qiannan said: "the epidemic is expected to have a very big impact on terminal consumption, and domestic demand is also exported, and domestic demand is mainly affected in the first quarter. The impact on foreign exports is mainly in the two quarter."

The weakening of terminal textile consumption is bound to be directly transmitted to the upstream raw materials. It is reported that the price of polyester staple fiber and viscose staple fiber continues to be low in recent years, and viscose staple fiber prices have dropped to 9300 yuan / tonne low point, and PET staple prices have also dropped to a low point near 5800 yuan / ton. The prices of these two kinds of chemical fibers are basically low since 2004. Low prices of chemical alternative fibers also reflect poor current downstream demand.

In terms of international demand, Liu Qiannan said: "in the USDA3 report, the world's cotton production has increased slightly, and the global cotton consumption has been reduced. Among them, the reduction in China is relatively large, resulting in an increase in the end of the global cotton stocks and an increase in the inventory consumption ratio. Taking into account the global outbreak in 3 and April, it is estimated that USDA will continue to reduce the consumption of global cotton in the coming period, which will lead to a continued increase in the end of the world's cotton stocks. Liu Qiannan estimated that 200-300 tons of global consumption would be reduced in the future.

Finally, as a futures analyst, from an operational point of view, Liu Qiannan said: "whether in the international market or in the domestic market, the trend of cotton prices will be closely related to the development of the global epidemic situation. In terms of investment, although the price of cotton and Zheng cotton is relatively low in history, the price is expected to be low in cotton planting, which may lead to a reduction in global cotton production, and the investment value of cotton will gradually become prominent. However, the premise is that the global epidemic situation is basically under control. At present, the market may be faced with a major crisis of several decades. At the moment, it is not recommended to rush into the field. It is necessary to wait for the bad and panic to release further before considering the investment. "