There Is No Obvious Adverse Change, And The Space For Cotton Price To Go Down Is Limited

On March 6, the U.S. Senate approved the $1.9 trillion economic rescue plan, which was reconsidered and voted by the US House of Representatives on March 9. On March 8, the K line of domestic zhengmian day closed positive. In addition, in several trading days from March 2 to now, Zheng Mian continued to close negative. As of last Wednesday's closing, the accumulated decline reached 1250 yuan / ton, returning to the price before the Spring Festival. From the long-term fundamental point of view, in the context of significant progress in epidemic prevention and loose macro atmosphere, cotton textile downstream demand recovered well. In the case of no significant adverse changes in the basic plane and macro plane, the space for Zheng Mian to continue downward is relatively limited.

Expected change in area

According to the report of the US Outlook Forum in mid February, the actual cotton planting area in the United States will remain basically unchanged in 2021 / 2022. In February, ice futures contracts in December rose 8.55% to 84.33 cents / pound, making cotton the most eye-catching agricultural product in February. As a result, the market believes that the U.S. cotton acreage in 2021 may be higher than the 12 million acres predicted by USDA Outlook Forum.

Domestic, in December 2020, according to the survey results of China Cotton Association in December, the area of cotton planting intention in China decreased by 2.17% year-on-year, and the cotton planting intention of Xinjiang cotton farmers decreased by 0.85%. With the further increase of domestic cotton spot price, cotton planting intention has increased. According to a special survey conducted by Xinjiang development and Reform Commission, it is estimated that the average sown area of cotton in Xinjiang will increase by 1.45% compared with the previous year.

The March US Nong report was more neutral

Judging from the March report, the data is good. In 2020 / 2021, the global cotton production is estimated to be reduced by 180000 tons, of which, the decline of cotton yield per unit area in the United States will lead to a decrease of 55000 tons in the total output; the global cotton consumption is estimated to increase by 55000 tons, mainly from Pakistan and Southeast Asia; the global cotton final inventory will be reduced by 249000 tons, mainly due to the reduction of final inventory in India, Brazil, the United States and Brazil. Among them, the U.S. is expected to reduce its final inventory by 22000 tons mainly due to the decline in production; India's estimated final inventory is reduced by 152000 tons due to the increase of export forecast; and the final inventory is estimated to decline by 110000 tons due to the decline of output in Brazil.

This month's US agricultural report maintains China's supply and demand forecast unchanged from last month.

On the day of the release of the US agricultural report, the cotton limit of ice period fell. Last Tuesday, ice cotton futures plummeted between 3 cents and 4 cents, and cotton futures had fallen about 3 cents before the US agricultural report was released. Market analysis shows that the good news of the US agricultural report and the US government's $1.9 trillion fiscal stimulus plan are basically released, resulting in the adjustment of speculation and positions. Ice American cotton fell from the high level at the end of February, and the continuous contract dropped from the highest 95.6 cents / pound to about 85 cents.

Domestic downstream demand recovered well

In the third quarter of 2020, the domestic cotton spinning PMI value reached the highest level in the same period in recent years, and this peak season phenomenon continued to maintain in January this year. According to relevant data, the cotton spinning PMI in January was 60.18, the highest in the same period in recent years, 10 percentage points higher than the same period last year, and 13 percentage points higher than the average value of the same period in the past three years.

In terms of export, in the first two months of this year, domestic textile and garment exports are still optimistic. According to the latest data, the cumulative export volume of China's textile and clothing from January to February this year was 46.19 billion US dollars, with a year-on-year increase of 55%. Among them, the export volume of textile yarn, fabric and its products was 22.13 billion US dollars, with a year-on-year increase of 60.8%. The export volume of clothing and accessories was 24.05 billion US dollars, up 50% year-on-year.

During the Spring Festival, the epidemic situation of Xinguan was effectively controlled, the flow of people was basically not blocked, and the rate of employees returning to work on time was high. On the one hand, the downstream demand of yarn and grey cloth is good, on the other hand, the number of staff in place is sufficient, and the operating rate of yarn mills and cloth factories is rising rapidly. As of last week, yarn and grey fabric load index has risen to 64.4 and 65.2, respectively 3.8 and 11.2 percentage points higher than two weeks ago. Due to the good downstream demand, the finished goods go smoothly and the inventory remains low. As of last week, yarn and grey cloth inventory index were 8.5 days and 17.7 days respectively, which were in the low position in recent years.

The price difference between internal and external cotton exceeds the standard of rotation

After the Spring Festival, the domestic cotton futures prices rose rapidly, driving the cotton spot prices higher. From the first trading day after the festival to the end of February, the main contract of Zheng cotton increased by about 1000 yuan / ton, and the spot price index of 328 cotton increased by about 500 yuan / ton. During this period, the cotook a index showed a volatile trend, ice US cotton continuous contract rose first and then fell. The pace of inconsistency led to a substantial rise in the price gap of cotton at home and abroad during this period. The price difference between 328 cotton price index and imported cotton (m) price index sliding standard tax port pick-up price rose rapidly from - 60 yuan / ton to 960 yuan / ton, which has remained fluctuating; the price difference under 1% tariff has jumped from 90 yuan / ton to about 1200 yuan / ton.

According to the calculation formula of cotton price difference at home and abroad announced by the State Grain and material reserve bureau and the Ministry of Finance (No. 2 in 2020), on March 10, the price difference between domestic and foreign cotton was 1850 yuan / ton, which was higher than 800 yuan / ton for three consecutive trading days, so the cotton rotation could not be started temporarily. According to the announcement, this round of cotton rotation time is from December 1, 2020 to March 31, 2021.

Cotton long-term fundamentals have no adverse changes; cotton prices at home and abroad after a rapid rise in the superposition of profits, prices fall significantly. At present, domestic and foreign cotton textile downstream demand recovery is good, strong support for cotton prices, falling space is limited. In addition, the hemisphere will gradually enter the planting period, and the change of weather may become the focus of fund pursuit again.