Is The Supply Side Reduction In The New Year Just The Wishful Thinking Of The Market?

Opening question: point 1 to USDA monthly data: USDA6 monthly report did not cut down on the expected output of the new year, but its initial data has taken into account the impact of relevant factors and has been reflected. Point 2 to locust plague: locusts have limited impact in the short term, mainly on Pakistan Sindh and India Rajasthan. In the long term, the second wave that is expected to arrive in India from East Africa in late June and late July, and the spread of the breeding season in the following 7-11 months is the focus of attention. Point 3: drought in the United States: the drought situation in Texas is not as strong as the market rumors. At present, the impact is limited. However, whether the late hurricanes will affect the output and quality of US cotton should be closely watched.

The easing of supply this year is a foregone conclusion, and the market is generally turning to the coming new year. Whether it is the reduction of rumours or the expected rebound in consumption, the market has been causing unusual turbulence recently. However, in the monthly report of USDA6, the new year's output forecast was unexpectedly not lowered, and the new report fell off after the report was released.

Will the output of the New Year be reduced? Is it USDA's hold on? Or is it a market speculation?

1, the expected output of some countries has had a slight effect on the future.

At present, the new cotton in the northern hemisphere is in the period of planting or growing. As the main cotton producing country, China, India and the United States and Pakistan are attracting more and more attention. From the domestic situation, according to the survey and statistics of the network, the sowing area and expected output of new cotton decreased slightly compared with the same period last year. The recent focus in India and Pakistan is mainly on the locust plague; the drought in the Texas cotton region and the hurricane season this year also sparked market concerns.

Judging from the expected output data of USDA6 monthly report, although production expectations are generally lower than expected in the market, the output of India, the United States and Pakistan is significantly lower than in the last few years or in recent years.

Conclusion: Although the USDA6 monthly report did not reduce the expected output of the new year, its initial data has taken into account the impact of relevant factors and has been reflected.

2. The footsteps of desert locust do not stop affecting landing or just time.

According to the food and Agriculture Organization of the United Nations, the desert locusts invaded the northern and central parts of the country. It is expected that the locust disaster will increase in late June and early July. If the summer spawning area at the junction of India and Pakistan meets monsoon rainfall during hatching season, it may increase the hatching rate of locusts.

But there are also some uncertainties that need to be taken into consideration. First is the prediction and the actual error. The current expectation is based on the assumption that it is free to fly, but the actual measures taken by India, Pakistan and Africa continue to take different preventive measures. The effectiveness of the measures needs to be taken into account. The second is the coincidence degree between locust invasion and related cotton stage. Judging from the expected time and path of the event and the cotton area in India and Pakistan, the spring locust population in the breeding area is expected to have an obvious impact on Pakistan's Sindh province and India Rajasthan. According to statistical data in recent years, the average total output in Sindh is around 50-60 tons, accounting for about 35% of the total domestic output in Pakistan, and about 1 million tons in the northern part of India, accounting for 15-20%. The third is the uncertainty of the locust activity path. In the later stage, the activity path and intensity of grasshopper will still be affected by the southwest monsoon activity.

On the whole, based on the current situation, the influence of Pakistan's Sindh province and Northern India cotton region, especially Rajasthan, is inevitable, but it can not support the sensationalism of a substantial reduction in production. It is difficult to predict the extent of the impact. We need to pay close attention to the activities of locusts.

Conclusion: locusts have limited influence in the short term, which is mainly affected by Pakistan's Sindh province and India Rajasthan. In the long term, the second wave that is expected to arrive in India from East Africa in late June and late July, and the spread of summer breeding areas in the next 7-11 months is the focus.

3. The degree of drought in Texas is waiting to be seen. Hurricane influence can not be ignored.

According to the latest release of USDA, as of last week, the new cotton seed sowing schedule was 89%, ahead of the same period last year, slightly lagging behind in the last five years. The growth bias of cotton in the United States and Texas was 17% and 25% respectively.

At present, the market is generally concerned about the drought situation in the main cotton producing area. According to the current drought situation, the area of drought area accounts for about 15%, but the main drought is moderate and severe drought. Extreme drought has not yet appeared. Compared with the same period in previous years, although they are relatively poor, they are still at an average level. Historically, the correlation between drought severity and abandoned crop rate and yield was strong.

As the most important land cotton producing area in the United States, the yield of Upland Cotton accounts for about 40% of the total in the United States, and even 50% before and after 2015/16. Therefore, the weather and output changes in Texas will have an important impact on the whole country, and we need to pay close attention to it.

In addition to Texas drought, according to this year's the Atlantic hurricane season forecast, the number and intensity of hurricanes landing is higher than the same period in previous years. Because of the reduction in production caused by hurricanes and the quality of cotton in Texas, it is obvious that the landing time and route of the late season need constant attention.

Conclusion: the drought situation in Texas is not as strong as market rumors. However, whether the late hurricanes will affect the output and quality of US cotton should be closely watched.