Multiple Factors Restrict Cotton To Keep "Cattle Hide" Market

According to the futures daily on April 19, at present, factors such as whether the auction of state-owned cotton was opened and whether the quota was issued were restricting the price rise of Zheng cotton. In this context, domestic cotton prices rise and fall easily affected by the replenishment cycle.

Recently, the trend of cotton at home and abroad has deviated significantly. Ice cotton has continued to rebound, rising more than 10.7% from the low point in early April, while the domestic cotton futures rose only 2.74% in the same period. The reason for the weakness of domestic cotton price is that domestic cotton spinning enterprises have lowered cotton yarn price, reduced inventory, reduced cotton procurement, and also affected by national cotton reserves and quota factors. In the context of adequate domestic cotton supply, cotton "cattle hide" trend will continue, until the downstream replenishment cycle restart, there will be a larger rebound. 　　

Downstream companies are still destocking

The replenishment cycle of cotton spinning enterprises in early March brought the price of cotton yarn to a higher level. The cotton price also rose to more than 17000 yuan / ton, and the spinning profit was also at 4000 yuan / ton, a new high since 2015. However, cotton yarn orders did not keep up, most cotton spinning enterprises just maintain the previous orders, cotton yarn industry gradually to inventory, random reduction of cotton yarn prices. 32 cotton yarns decreased by 1670 yuan / ton from 25780 yuan / ton in early March to 24110 yuan / ton (quoted on April 16). Accordingly, 328 cotton was also reduced from 16820 yuan / ton to 15360 yuan / ton (quoted on April 16), down 1460 yuan / ton. However, the price difference between cotton and cotton yarn is still as high as 8750 yuan / ton. The spinning profit is at a historical high level, and there is obviously room for further compression. If the spring demand does not keep up, textile enterprises in order to seize market share, reduce cotton yarn prices, and even loss sales are likely, which is not conducive to the rise of cotton prices.

From the cotton 328 index and textile mill cotton yarn inventory days, there is an obvious positive correlation between the two, that is, cotton yarn demand affects cotton price, or cotton price affects cotton yarn procurement. Before 2020, we can see that the cotton yarn inventory data lags behind the cotton price, and then the cotton price lags behind the cotton yarn inventory days, that is, after 2020, the demand is guiding the change of cotton price. At present, cotton textile enterprises are still in the process of de stocking. They may start to replenish their stocks at the level of last August, or they may start replenishing stocks soon. However, the author thinks that the probability of the former is relatively high. At least, we have not seen the news of large increase of orders. 　　

The planting area decreased slightly

From the cotton planting intention survey, cotton planting area in China and the United States decreased slightly. According to the survey results of the national cotton market monitoring system, in 2021, China's cotton intended planting area will be 45.426 million mu, with a year-on-year decrease of 256 thousand mu or 0.6%; according to the report of the United States Department of agriculture at the end of March, the planting area of all cotton in the United States in 2021 is expected to be 12.036 million acres, with a year-on-year decrease of 56500 acres or 0.46%, which is beyond the expectation of the market. 　　

Under the background of little reduction in cotton planting, the U.S. Department of agriculture predicted in April's supply and demand report that the global cotton production in 2020 / 2021 will be 24.612 million tons, less than 30000 tons less than the previous year; the consumption will be 25.658 million tons, an increase of 3.248 million tons compared with the previous year; the global supply and demand gap of cotton is 1.046 million tons, the inventory consumption ratio is still as high as 79.30%, and China's inventory ratio is 95.25%, Much higher than 67% in June 2018. Therefore, even if the situation of global epidemic prevention and control turns better, it is not enough to rely on the warming of demand to change the relationship between supply and demand. It is necessary to reduce supply to increase the rising factor. 　　

Ice cotton difficult to copy the same period in 2018

Since the outbreak of new crown pneumonia, ice cotton bottomed up and rose to a high of 95 cents / pound. After that, the fund began to reduce the number of cotton orders. On February 23, the net multiple orders of the fund reached 97000. At this time, the closing price of ice cotton was 92.58 cents / pound, and then decreased continuously. The number of orders increased slightly until March 9. However, in the last three weeks, as ice cotton prices continue to fall, the fund has reduced its position all the way. On April 6, the fund held 74000 net multiple orders. 　　

From the spot perspective of US cotton, the US cotton sales progress is more than 90%, similar to the same period in 2018. Before the expiration of the contract in May, if the fund makes use of the theme of spot shortage to force traders to move their positions or price, it will be possible to raise the futures price again. However, what is different from the current situation is that the fund continued to increase positions and multiple orders during the price rise at that time, and the net multiple positions reached 118000 hands. However, the current net position of positions does not conform to the trend of increasing positions. If the fund does not add more cotton in the next few weeks, then the judgment that ice cotton will form a high point in the first half of the year at 95 cents / pound is highly probable. 　　

At present, there are still many factors restricting the rise of cotton price, such as whether the national reserve cotton is rotated, whether the quota is increased, whether the epidemic situation constrains the cotton demand, and so on. The rise and fall of domestic cotton are easily affected by the replenishment cycle, and there is little room for further increase in the short term.