Cotton Yarn Prices Rose After A Cautious Attitude

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Fundamental supply and demand background

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Global cotton production maintained a small trend of reduction, demand recovery is expected to be optimistic, inventory pattern continued. In the new year, the global cotton planting area in the international market has fallen short of expectations, and the adjustment of production reduction is lower than expected. The adjustment of demand maintains the general tone of "strong recovery". Although the expectation of significant reduction in area falls short and the overall supply is sufficient, there is no background of large increase in output, and de stocking continues.

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In the new year, the global cotton supply and demand structure has fundamentally changed, from 4.174 million tons of surplus supply in 2019 / 20 to 820000 tons of supply and demand gap. Compared with the estimated gap of 798000 tons in June, the gap will continue to increase by 22000 tons, which will lead to a decrease of 2.791 million tons in final inventory to 19.013 million tons, a decrease of 340000 tons in final inventory compared with that in June, and the inventory consumption ratio will decrease by 26.7% to 71.24%, Inventory consumption was 1.64% lower than the June forecast. Whether the epidemic situation will continue to ferment in the later stage and whether the trade war will escalate again will become the uncertainty risks faced by the consumer and trade sides.

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China's cotton output in 21 / 22 is expected to be 5.64 million tons, with a year-on-year decrease of 3.89%, annual consumption is expected to be 8.19 million tons, with a year-on-year increase of 5.69%. The export volume is expected to be 40000 tons, with a slight increase year-on-year. The import volume is expected to be 2 million tons, with a year-on-year increase of 11.11%. The inventory consumption ratio will be reduced from 81.37% of the previous year to 65.81%. The annual production and demand gap increased to 2.55 million tons, an increase of 669000 tons over the same period of the previous year. The main reason for the expansion of the gap is that the output is reduced but the demand is expected to return to optimism, and the annual de inventory pattern is maintained.

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This year, drought weather is frequent, cotton production and quality have reduced to varying degrees, but the optimism degree of demand recovery is better than expected. In the second half of the year, with the continuous good news of vaccine, the global textile market recovery is accelerating, the demand continues to warm, the epidemic situation is only a matter of time, and the long-term trend of international cotton is still good.

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The recovery of consumption will become the main support and transaction theme of cotton market in the future

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Restorative rigid demand is objective, the rhythm of de stocking and whether the internal and external demand can resonate will determine the rhythm of cotton price trend and the future space. Compared with the variables of output, there is more room for demand adjustment, and the pace of de stocking will continue, which is the basis of the future trend. As for when the demand will start, whether it will recover slowly or if it will break out in a concentrated resonance, many external forces will still be needed.

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Domestic downstream textile enterprises have high profits, high start-up, but low inventory, which will support the cotton market in the second half of the year in terms of price profit transmission and future replenishment behavior. At present, it is still in the off-season of the textile market. The order time of enterprises is about one month, the price is relatively stable, the inventory of enterprises is maintained at a relatively low level in history, and the situation of high load and high start-up is still continuing, which limits the space under the domestic cotton price. If the external demand can be superimposed, the demand will recover obviously, but the focus should be on the change of alternative demand, For example, the rapid recovery of China's demand is under the background of the serious epidemic situation in Southeast Asia and other textile countries, and the industries concerned will inevitably return with the recovery of epidemic situation in these countries, The time and rhythm of backflow will have a great impact on the overall structure of demand whether our alternative demand can be supplemented by other external demand or replaced by domestic demand growth.

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The progress of vaccine injection can be used as a reference index for the recovery of the epidemic situation. China's domestic textile and clothing demand has basically returned to normal rhythm, while the external demand still has room to continue to expand. Europe and the United States, as the main consumption areas, will be the main export concentrated areas in the future with the promotion of the epidemic situation and the excessive epidemic situation.

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At home and abroad, there is a rigid need to replenish the warehouse

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In the first half of the year, the recovery of clothing import in the United States is not as good as that of textiles, and its domestic related inventory is also at a relatively high level. In the future, there is a demand for replenishment and terminal demand recovery. As a country with relatively new vaccine development, it also has conditions to recover and recover relevant trade and demand. Although the progress of vaccines in the European Union is slower than that in the United States, in fact, the market with the largest demand for textiles and clothing. Although the import of textiles and clothing rose slightly in the first half of the year, it is far from reaching the historical average level. After the outbreak, the demand for textiles and clothing in the EU will have a substantial recovery and growth, and the replenishment will also increase significantly.

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China's reserve cotton inventory is low. Last year, the state-owned cotton storage began to rotate from May 5. Since the middle of last year, the middle and lower reaches of cotton enterprises have experienced an obvious rapid de stocking process. As of September 30, last year, a total of 1 million tons were dumped and stored. At present, the National Reserve has more than 1.6 million tons of inventory, which is far from the safety strategic reserve of 3 million tons. Reserve cotton represents the low-quality cotton with low quality requirements, and has the advantage of low price. After the outflow of 600000 tons, it will lead to the surplus of cotton of planting land quality, and the shortage of high-quality cotton has not been solved. On the contrary, it increases the difficulty of low-quality cotton warehouse receipt outflow. The enthusiasm and price of transaction in the later stage should be focused on.

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The inventory of downstream finished products is still at a low level in recent years. The inventory of yarn and grey cloth remains at a low level. There is a strong expectation of demand improvement and replenishment, and the marginal pressure of inventory is reduced. Recently, with the gradual recovery of downstream demand, the cotton inventory of textile enterprises has fallen rapidly, the downstream cotton yarn market volume and price have risen, and the situation of cotton yarn delivery is good, which makes the product inventory of textile enterprises decline at a low level, and many enterprises arrange orders until the end of August. The inventory of finished grey cloth and yarn remained at a low level, especially the cotton yarn inventory was low, and the start-up rate of textile enterprises rose to 65% seasonally. Compared with the previous year, the profit of textile enterprises increased by more than 30%, and the total profit was also higher than that of the same period last year. Textile enterprises profit recovery also makes the late purchase of cotton become positive, the acceptance of cotton prices is expected to improve.

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At present, the profits of textile enterprises maintain a high level, and cotton yarn inventory declines at a low level. As the "golden nine silver ten" peak season is approaching, textile enterprises are optimistic about the follow-up orders. However, cotton yarn traders inventory has been large, need to be vigilant. In addition, the rising price of cotton yarn raw materials is not smooth downward transmission, and the follow-up connection may be difficult.

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Advance layout and rush collection to drive up prices

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This year, the cost continues to rise. The land rent has increased by 200-300 yuan / mu, the cost of agricultural materials and chemical fertilizer has increased by 60-70 yuan / mu. The average cost of one kilogram of cottonseed is expected to increase by 1 yuan to 6.5-7 yuan / kg. Last year, the price of 2.1 yuan / kg of cottonseed, 1000 yuan / ton of processing fee, and the average price of 6.5-7.5 yuan / kg of cottonseed correspond to the lint cost of 15600-18400 yuan / ton, Therefore, it is estimated that lint price is expected to be more than 17000 yuan / ton after the listing of new cotton.

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The cotton ginning capacity is seriously overcapacity, and the downstream profits are high. Last year, the scene of new cotton's rush to market was fierce and spectacular. Under the expectation of production reduction this year, coupled with the passive situation of no stock preparation after the epidemic, the expectation of rush collection this year is even more serious. Even if it is predicted that the rush collection may not have a good profit, it does not want to repeat the embarrassment of the passive situation in the previous two years, Therefore, it has become inevitable for the industry to rush in. Since it has been determined, each company may arrange admission more in advance. The later it is, the more expensive it is, the more passive it will be. It will also lead to the rush to enter the market in advance. The price will be started in advance. It will depend on the performance of all parties. What can be determined is that the sales rhythm and market risk of high-cost cotton will increase.

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In the early April to may, Xinjiang cotton suffered from weather disasters, and the growth progress was generally slow. At present, most cotton areas in Xinjiang were in the flowering and boll stage. At present, the high temperature weather still threatened the growth of crops. Although the domestic cotton resources are sufficient, but based on the high cost of new cotton, it is difficult to find low price resources in the spot market, which will provide strong support for Zheng cotton futures in the short term.

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summary

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The degree of inflation determines the overall macro background and capital attitude of future consumption. The external environment is more relaxed. Consumption has not seen the explosive recovery of demand after the epidemic and the recovery background of internal and external resonance, but there are conditions worthy of expectation. Sino US relations have a great impact on the cotton industry. Trade frictions and conflicts between China and the United States will continue to exist, and there will be periods of recovery and tension alternating. This is also one of the biggest uncertainty risks of this variety in the past and in the future. Confrontation and mitigation occur alternately, and crisis and challenge coexist.

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In the economic upward cycle, the general trend of commodity market is upward. The main pillar support of cotton textile industry chain is the recovery and recovery of downstream consumption. With the end of the epidemic, the overall recovery of domestic and foreign consumption is expected to maintain an optimistic trend. If the macro risk fluctuates greatly or the crude oil price breaks through, the cotton shock center will move up correspondingly.

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On the whole, the expectation of new cotton rush harvest, the healthy downstream textile inventory structure and the approaching peak season, the cotton market is still in a partial pattern. However, due to the blocked transmission of raw materials at the end of grey cloth, and sufficient cotton resources in China, the epidemic situation in Southeast Asia is still grim, and the follow-up uncertainty of European and American epidemic situation is also large, so we are cautious about the space for cotton price to continue to rise.

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Due to the market's excessive desire for new cotton, the market has entered the market ahead of time to rush for collection. The fund admission is full of confidence, the throwing and storage has been implemented, the industry consensus has been reached, the supply and demand structure is still in place, and the rhythm has been scrambled. Be careful to guard against the high-level risks, move the benches and prepare the tea. Let's see how the play ends.