Cotton Market: Seek And Then Move Quietly And Deeply.

One, several kinds of determination that can be expected.

1. Determine the direction of navigation.

At the 2019 China International Cotton Conference, leaders of relevant departments indicated that in the current and future of China's cotton textile and garment market, the determination of market diversification direction, the establishment of high quality determination, and the regulation and marketization must be determined. The measures to control domestic cotton policies are defined as subsidies, reserves and imports. The purpose of regulation and control is to ensure that the difference between domestic and foreign cotton prices is maintained at a reasonable level.

2. Adequate supply of domestic cotton.

Cotton output increased slightly in 2018/19, according to the statistics of China Cotton Association, the total output of the country was 6 million 110 thousand tons (+1.05%). Domestic cotton business inventories and high inventory in Xinjiang area, the data in May were 3 million 528 thousand and 100 tons and 2 million 470 thousand and 200 tons, much higher than the same level in the past 8 years. At the same time, in the futures warehouse receipts, Zheng cotton warehouse receipt (including effective forecasts) hit a record high in the current year, reaching 23147 (about 995 thousand tons). In July 2nd, it was 17488 (-24.4%), and the warehouse receipt pressure stage was obvious.

From May 5th to July 3rd, a total of 389 thousand tons of cotton reserves were sold in 2018/19, with a turnover rate of 86.54%. Since 2016, cotton has been largely out of stock, and 2016-18 years have gone stockpiles to about 8000000 tons. In 2019, the reserve policy was adjusted to "rotation".

2018, in 2019, a continuous increase of 800 thousand tons of quasi tax quotas was made, and cotton imports increased significantly. According to customs statistics, in the first 8 months of 2018, China imported 1 million 256 thousand tons of cotton, an increase of 83% over the same period last year. In 2018/19, the proportion of cotton importing countries in China showed a structural change. The growth of cotton in Brazil accounted for 28%, followed by 27% in Australia, 15% in India, 13% in the United States, and 17% in other countries.

3, domestic cotton textile consumption pressure determination

In 2018/19, the textile industry was stable and pressure bearing, and the output of Chinese yarn and cloth showed a downward trend. According to the National Bureau of statistics, the added value of textile industry increased by 1.8% in April, the yarn output was 2 million 310 thousand tons (-2%), and the output of cloth was 4 billion 200 million meters (+1.7%). In 2019 1-4, textile and clothing exports declined, totaling 75 billion 780 million US dollars, down 3.99% compared with the same period last year. Textile exports totaled 36 billion 680 million US dollars, up 0.83% over the same period last year. Clothing exports totaled 39 billion 100 million US dollars, down 8.12% from the same period last year. Clothing imports maintained a relatively fast growth. Over the past 2014-2019 years (1-4 months), China's textile and clothing imports accounted for 34.2% of the total imports, 23.21% from 34.2% to 34.2%, and from 27.29% to 19.4%, and from 15.97% to 15.36%.

4, the domestic manufacturing slowdown is determined.

In June, China's official manufacturing PMI was 49.4, the former value was 49.2, and it was lower than the ups and downs line for 2 consecutive months. In June, the official non manufacturing PMI in China was 54.2, and the former value was 54.3. Domestic manufacturing industry supply side and demand at the same time decline, big business boom continued to decline, employment index downward, the second quarter economic slowdown. At the end of June, a small number of domestic textile enterprises purchased the lint replenishment storehouse during the week. Large domestic traders sold to textile enterprises last week. This is a positive signal, but liquidity and continuity are not enough.

5, the government fully supports the healthy and sustainable development of the industry.

National leaders attended the opening ceremony of the 2019 summer Davos forum in Dalian on the morning of July 2nd, and delivered a special speech: let all kinds of market players let big enterprises and growth enterprises compete on the same stage, fair competition and common development. In the face of the current downward pressure on the world economy, we must carry forward the spirit of partnership, make consultation on an equal footing, seek common ground while reserving differences, control differences, expand consensus and form joint forces. We will deepen the opening up of the manufacturing sector, deepen the opening up of modern services such as finance, and steadily push forward the reform of exchange rate formation mechanism and capital account convertibility. In the first half of this year, China's economy is generally stable and running at a reasonable interval, and the economic fundamentals remain stable and the main economic indicators are in line with expectations. We must thoroughly implement the macro policies and measures that have been promulgated and do not carry out the "strong flood irrigation" type of strong stimulation, but do not take the old road of spreading stalls and extensive growth.

Two. Several uncertainties in the determination.

1, the time window of RMB depreciation or appreciation is uncertain.

Since the second quarter of 2018, the exchange rate of the US dollar has continued to rise, and the depreciation of the RMB exchange rate has taken shape. The Sino US economic and trade consultations affect the economic development between China and the United States, and the global economic and trade flows have been effectively adjusted. Whether the RMB exchange rate against the US dollar will depreciate 7 yuan will trigger a heated debate in the market. Zhou Xiaochuan, the former governor of the Central Bank of China and vice chairman of the Boao forum for Asia, said that there is no need to pay too much attention to the so-called integer digit. "7" is not necessarily the bottom line of the exchange rate. China still adheres to the exchange rate determination mechanism based on market supply and demand, and does not need to change the formation mechanism of exchange rate because of the integer pass.

2, the substantive progress of Sino US economic and trade consultations is uncertain.

Learn from Ren Zeping's "interpretation of the G20 meeting and the June PMI index" part of the article: at the 2019 Japan G20 summit, the results of the Sino US leaders' meeting made progress and resumed negotiations. The US side: 1, the US side will not levy new tariffs on China during the negotiation period; 2, allow parts to be sold to HUAWEI; 3, welcomes the overseas students in China; 4, if China is open, the United States will be open to China. China: to increase imports of US agricultural products, the US side is going to make a list. However, the meeting did not touch on the fundamental issues such as trade imbalance, big structural reform and big country relations.

At the 2019 China International Cotton Conference, the representative of the China Textile Import and export chamber made a speech entitled "analysis of China's textile export market".

The United States is China's largest export market for textiles and garments. In 2018, exports to the US textile and apparel amounted to 49 billion US dollars, accounting for 17.6%. Cotton is the most import commodity. In 2018, the total import of textiles and clothing from the United States totaled 760 million US dollars, and imported cotton was US $1 billion 60 million.

The textile and clothing products in Listing 3 and 4 complement each other, including almost all textile and clothing products. Only medical vulcanized gloves are not included in the list of taxes. According to the statistics of the textile import and Export Association, the textile and clothing products (61, 62, 63 +25 tax numbers) in Listing 4 exported US $42 billion 683 million to the US in 2018, an increase of 7.46% over the same period last year.

In the 1-4 month of 2019, the export of US tax related products dropped sharply, and the loss of enterprise orders.

3. New orders for investment funds and textile yarns are not yet clear.

Under the macro news stimulus, the domestic cotton price rose rapidly after the opening of the week, and the market sentiment was too high. However, the related orders and resumption of domestic textile yarn products are still not optimistic. We think this is a stalling tactic between China and the United States, especially the US side. In June, the latest CFTC cotton futures and options net rate has been reduced to around -38%. Speculative funds have maintained a bearish mindset on the US cotton contract. The net capital ratio has reached the lowest level in the past 5 years. The future direction is to create "brilliant" again.

In the future, when domestic traders and textile enterprises continue to purchase the lint replenishment warehouse, the sales of these enterprises will increase and the inventory of finished products will remain low. More capital in China began to explore more cotton opportunities, and continued in-depth research on industry and macro research. Industrial customers should make rational use of futures and option tools to assist spot purchase and sale operations, reduce spot holding costs and supplement equity income.