Demand Or Blowout Cotton Prices Will Be Suppressed First.

Affected by the new crown pneumonia epidemic, the downstream textile enterprises started to delay 7 to 30 days earlier than before. After the commencement of construction, enterprises also faced various problems such as recruitment difficulties, poor logistics and transportation, insufficient new orders and so on. The start-up load was only about 40%. Before the Spring Festival, Zheng cotton's breaking position rose and cotton textile enterprises replenish the warehouse actively. After the holiday, cotton stocks were generally available for 40 to 60 days, and some enterprises could be more than 60 days. Under the condition of low start-up load, cotton textile enterprises were not actively replenishment, and the cotton market started slowly. However, in the medium to long term, with the support policies coming out, the impact of public health incidents is weakened, Sino US trade relations continue to improve, and the market of cotton textile and terminal textiles will continue to improve. Foreign trade orders will return gradually, superimposed the traditional peak season of textile products in the two quarter, and the cotton demand or slow increase will be promoted in the later period.

Short term logistics and order constraints

It is understood that the main factor affecting the short-term improvement of the cotton industry chain is logistics and orders. At present, logistics transportation in the province has gradually resumed, but trans provincial transport still needs to be opened up. By the end of June, the logistics freight reduction and exemption policy has been greatly favorable. However, affected by the new crown pneumonia epidemic, short-term domestic consumption is suppressed and foreign orders are also shifting. Overall, the downstream textile enterprises have a heavy wait-and-see mentality, and cotton procurement is not active.

Various supporting policies in China

In order to lighten the burden on enterprises, a series of support policies have been launched by various governments, including the free logistics and transportation policy, capital support policy, employee support policy and so on in June 30th. The latest news is that the national development and Reform Commission issued a notice on the 22 day, from February 1, 2020 to June 30th, phased reduction of electricity consumption cost by 5%. The price range includes all power users except the high energy consuming industries, which are now implementing general industrial and commercial electricity prices and large industrial electricity prices. According to the survey, the electricity price will be reduced by 5%, the electricity consumption per ton of yarn will be reduced by about 40 yuan, and the output of 10 thousand tons of yarn will be reduced by 400 thousand yuan. For example, the small textile enterprises with 50 thousand spindles will pay less than 1 million 160 thousand yuan per month in full load. Enterprises with high automation and large power consumption will have greater burden. Public health incidents do not knock us down, only make us stronger. We believe that the state and the government will give more support to the textile enterprises and help enterprises recover quickly. There are people, goods and capital flows when enterprises return to work. In the later stage, with the reduction of the epidemic situation, all regions will resume work, resume production and accelerate the pace of life, and the closed-loop production and consumption will gradually get through, and the recovery speed of cotton and textile market will be further accelerated.

Price amplitude will increase

Although demand for cotton has been suppressed, the supply of agricultural products will increase, and the probability of future abnormal weather will increase. In 2020, agricultural products will be greeted with "new year". Investors are expected to underestimate cotton varieties' bullish expectations. In February 17th, under the news of the Lok Pakistan locust disaster, the turnover of the main contract increased by 402 thousand. The Australian fire has been raging for a long time, and the output of Australia cotton has already been foregone conclusion. With the advent of the new cotton planting season in the two quarter, the supply side of Zheng cotton also has the opportunity of speculation.

To sum up, although the cotton market has started slowly at present, under the support policies of the government, the downstream textile enterprises have resumed production in succession, and the textile industry chain has been slowly recovering from the point belt line, the line belt surface and the surface belt style, and the cotton consumption is also increasing slowly. In addition, in the medium to long term, with the weakening of public health events and the continuous improvement of Sino US trade relations, the cotton spinning and terminal textiles market will continue to improve, and foreign trade orders will gradually return to the two quarter of the traditional textile peak season, and cotton demand will be blowout later. In addition, under the disturbance of supply side information, cotton prices in the first half of the year are either suppressed or raised first. In the late stage, we should be vigilant against the sharp fluctuations in short-term Zheng cotton caused by the bad weather during planting season.