Xiao Fengbo: The Probability Of Domestic Cotton Peaking In The Short Term Is Large

Since the national day, cotton prices have risen sharply. On October 19, Zheng cotton futures rose by more than 5%, and in the case of market consensus, Zheng cotton prices continued to adjust in the past week. As the harvest in Northern Xinjiang is coming to an end, cotton textile enterprises began to be cautious in purchasing. Rumors about the return of overseas orders were falsified. The favorable factors supporting the further rise of cotton gradually subsided, and the probability of cotton peaking in the short term was greater.

1、 Global cotton supply is abundant

At present, the global cotton supply is sufficient, which can be said to be a small surplus. USDA predicted in its October report that the global cotton production was 25.518 million tons, which was 60000 tons lower than last year; the demand was 24.535 million tons, which was 80000 tons less than last year. From the perspective of the three major cotton producing countries, only the United States has reduced cotton production by 220000 tons, while India and China have increased by 70000 tons and 160000 tons.

In terms of supply, the yield of cotton being harvested in Xinjiang this year is higher than that of last year, mainly due to a slight increase in yield per mu. In some areas, the yield per mu has increased from 350 kg last year to 400-410 kg. Due to the impact of several hurricanes in the United States, cotton harvest progress is later than last year, but the impact on quality and yield is less affected by the hurricane. Indian cotton is in the growing period, and there is no report that the growth is affected by the weather.

2、 It is difficult to distinguish the authenticity of "Indian orders transferred to China"

"A large number of Indian textile orders have been transferred to China, with huge orders, which are said to have been scheduled until May next year." This news has played a huge role in boosting the rise of cotton, but the actual situation is not as good as market rumors. For example, Dongfang Shenghong, a listed company, said, "the recent booming orders of the company have little to do with the transfer of orders from India." Jiangsu Jujie microfiber Technology Group Co., Ltd. announced that according to the recent social media reports that the orders of Indian textile industry returned to China due to the epidemic situation, the company did not find any increase in the order volume due to the event after multi-party verification.

People in the industry believe that the increase in foreign orders has indeed been transferred to China due to the epidemic situation in India. India's textile industry mainly focuses on the middle and low-end products in the whole international market, while the orders of high-end products that are difficult to produce are transferred to China. It is normal that some low-end products in China are transferred to India, which has been the case in previous years.

3、 Cotton base narrow sell hedging plate continue to intervene

Before the festival, the cotton futures price was low, and the basis difference between spot and cf2101 contract was maintained at about 100 yuan / ton, which was difficult to arouse interest in selling hedging. However, since October, cotton price rose rapidly, and the basis began to turn negative. On October 14, the basis was - 314 yuan, and on October 19, it reached - 400 yuan / ton. According to the quotation of 14800-15000 yuan / ton gross weight of cotton machine picking in Beijiang "shuang28", it was registered The profit of warehouse receipt was more than 400 yuan / ton, and the number of cf2101 positions reached 430000, a record high, and then cotton began to decline. According to the number of warehouse receipts forecast, the number of warehouse receipts forecast before the National Day festival was stable at 31, and rose to 466 on the 26th.

4、 The price difference between domestic and foreign cotton has been enlarged, and the linkage effect between domestic and foreign cotton prices has been weakened

Since October, the growth rate of domestic cotton is significantly greater than that of ice cotton futures, cf2101 contract has increased by 15%, while ice cotton futures has increased by 8.42%, the domestic increase is significantly greater than that of the external market. In terms of spot, the price difference between domestic and foreign cotton was maintained at about 200 yuan / ton before the national day, and then gradually expanded. As of October 26, the port pick-up price within the import quota was 12989 yuan / ton, while the domestic 3128 grade cotton index was 14636 yuan, with a difference of 1647 yuan / ton, which was in the historical high zone. Although the 1% tariff import quota is only 894000 tons, there are still 800000 tons of sliding standard tax quota. At present, the import also has nearly 1000 yuan / ton profit, which accounts for more than 20% of domestic cotton consumption. The impact of cheap imported cotton on domestic cotton is more and more obvious.

In the future, there will be two possibilities for the rational return of domestic and foreign cotton price difference to 500-800 yuan / ton: one is that domestic cotton is stagnant, while ice cotton is up; the other is that domestic cotton falls by a large margin, while ice cotton falls slightly or consolidation. At present, the main reason supporting the rise of ice cotton futures is the production reduction caused by the rainfall and tropical hurricane in the United States. There are still doubts about whether the price can be increased by more than 7-10%, so the author thinks that the first possibility is greater.

In the medium term, the epidemic situation and Sino US trade relations, two important factors limiting the rise of cotton, have not been significantly improved. In the short term, the increase of domestic orders is only a transfer of global cotton demand, not an increase, which is good for domestic cotton in the short term. However, if the growth rate of demand is lower than expected, it is difficult to keep up with the later orders, and the probability of reaching the top of the futures price of RMB 15300 / T is higher Big.