Zheng Cotton Market Trend Is Still Repeated In The Short Term.

After May 1, trade friction between China and the United States rose again, and market risk preference recurred. Zheng cotton futures oscillating upward. Recently, under the expectation of favorable policies, the center of gravity of the disc has been shifting upward.

Demand side restricts bounce height

Cotton futures have always been dominated by supply side speculation, but this year's demand side's drag on cotton prices should not be overlooked. Since 2018, China's textile industry has seen a sharp decline in profits. The textile industry has been relatively difficult to manage in recent years. Under the impact of the epidemic, the textile industry is even more difficult. The demand setbacks in the first four months have proved that from 1 to April, China's textile exports were increased by 2.9% compared with the same period last year, due to the fact that the export of respirators and other anti epidemic materials increased by 22.3%. From 1 to April, the retail sales of clothing and textiles in China decreased by 29% compared to the same period last year. From 1 to April, China's textile output decreased by 29.1% compared to the same period last year, and the yarn output decreased by 20.9% compared with the same period last year.

After the Spring Festival, domestic enterprises resumed work in succession, and textile enterprises rushed to complete the order. However, with the outbreak of overseas outbreaks, textile producing countries are facing delays in orders and even abolition. Demand recovery is weak in the first half. According to USDA's monthly cotton supply and demand monthly report in May, global cotton consumption in 2019/2020 dropped by 5 million 600 thousand packages to 105 million packages, 12.7% less than the previous year, and 5 million 900 thousand stocks at the end of the year, an increase of 16 million 900 thousand packs compared with the previous year, while the global cotton inventory consumption in 2019/2020 was 93% after adjustment.

Focus on weather and locusts in main producing areas

According to USDA's cotton supply and demand forecast for the first time released in 2020/2021, global production is expected to be reduced by 3 million 700 thousand packages, consumption is expected to increase by 11 million 500 thousand packages, ending inventory is expected to increase by 2 million 300 thousand packages, and the inventory consumption ratio will drop from 93% to 85%. The supply and demand forecast for the new year is released for the first time.

The sowing speed of new cotton is faster than that of the same period last year. The latest survey results of the China Cotton Association show that the cotton planting area in China decreased by 4.15% over the same period in 2020, of which the cotton planting area in Xinjiang decreased by 0.59% compared to the same period last year, accounting for 79.4% of the total area of the whole country. The national cotton planting rate was 91.88%, an increase of 2.52 percentage points over the same period last year, of which the sowing rate in Xinjiang area was 98.34%, an increase of 1.33 percentage points over the same period last year. The latest US cotton production report released by USDA showed that as of May 17th, the US cotton sowing schedule was 44%, an increase of 12 percentage points from the previous week, an increase of 5 percentage points over the same period last year, an increase of 4 percentage points over the past five years.

In early May, locusts attacked parts of India and Pakistan again. In addition, the future growth period of weather speculation is still the focus, attention to the main production area weather conditions.

The trend of repeated downward trend is still early.

The market has shifted to the logic of resumption of trade in Europe and America, and demand has begun to show signs of better circulation. However, the restoration of demand will take a long time, and the risk of emerging market risks still exists. Market sentiment will be repeated, and the trend of the disk will be relatively tangled. China and the United States have signed a large number of US cotton in the first stage agreement between China and the United States. At the same time, the market rumors of agricultural products purchase and storage, although the specific content has not yet been released, but because cotton prices are in the low range, any policy role will be magnified. Although demand is not bright enough, the demand side will become a secondary factor at this stage of cotton growing and growing season, which will restrict the rising height and will not affect the rising rhythm. However, it should be noted that if the global epidemic duration is over expected or the relationship between China and the United States is repeated, then the restoration of the global textile and garment supply chain will be affected, and the real trend market will be further pushed back.