The Policy Of Re Entering Cotton Reserves Will Be Restarted. Zheng Cotton Will Look Down To The Bottom.

The US Department of agriculture's November supply and demand report lowered global cotton production, initial, final and consumption data in 2019/2020. Among them, the global cotton production increased slightly by 2.64% over the same period last year, and the stock at the beginning and end of the year was basically the same as last year, and the export data had been adjusted to 6.66%. The CotlookA index is relatively low in the past 5 years. Since 2018, Sino US trade friction has led to a decline in cotton prices and most of them are expected to weaken.

Domestic supply is relatively stable.

In November 28th, the difference between inside and outside cotton prices under the 1% tariff quota was -165 yuan / ton. Last week, it began to enter the upside down state again, and the price index of the US cotton index was stronger than the Zheng cotton index. In the domestic import price index of cotton to port, S, M, L three grades cotton quotes entered the new year, and overall stability upward. In recent months, new orders and operating rates for domestic textile and apparel are still insufficient, but data in October have improved slightly, and cotton textile PMI has returned to 50% above the line.

The total domestic cotton supply in 2019/2020 was relatively stable. In October, domestic cotton business inventories were raised to 3 million 224 thousand and 300 tons, a 46.33% increase over last month, and 709 thousand and 600 tons of industrial inventories, a slight decrease from last month. The processing speed of new lint cotton increased, and the commercial inventory was the highest in the same period in the past 10 years, but the quality decreased overall compared with last year (especially with high impurity index). Therefore, the textile enterprises of high quality gauze products have difficulty in purchasing Xinjiang cotton resources, and scarce resources can be used.

Reserve rotation policy restart

According to the latest news, the reserve cotton rotation policy is restarted after a few years, the time is from December 2, 2019 to March 31, 2020, the number is about 500 thousand tons, and the category is Xinjiang cotton. The market will become the biggest buyer in the next quarter. The actual transaction rate and the average price of the cotton will guide Zheng cotton to find the bottom. We believe that the reserve cotton will enter in two ways:

One is to choose imported cotton wheels. Most of the international cotton spot prices are anchored by ICE cotton textile products, and the cotton exporters represented by the United States, Brazil and Australia are speeding up the sale of cotton to the Asian region. The domestic textile enterprises have locked the cost of imported cotton according to the order demand and the rhythm point of replenishment, so as to ensure the quality of the products; the rising price of imported cotton materials has driven the price of imported cotton yarn to rise synchronously. When the domestic yarn is lower than the quoted price of the imported yarn, an anti substitution behavior is formed. First, it is conducive to the domestic yarn going out of stock, and secondly, the inventory of domestic yarn, grey fabric, clothing and other products is reduced, and the downstream enterprises are driven to purchase raw materials from the upstream industry chain of the upstream industry chain to form a favorable cycle, thereby improving the commodity circulation of product sales and raw material procurement, and thus improving the commodity liquidity of the products. The textile industry has the following advantages: (1) the price of imported cotton is up to. The Chinese market is the largest cotton consumer in the world.

The two is to choose domestic cotton wheels. Domestic cotton spot prices rise at a high level, and high cost cotton prices squeeze yarn profits. In order to control raw material costs in a short time, the domestic textile enterprises appropriately purchase raw materials such as cotton and lock up the operating costs of each link; the total amount of national cotton reserves increases; the relative fixed supply of domestic cotton increases before the next cotton sale; the cotton spot price trend generally rises first and then falls; during the rising price of Xinjiang cotton, the spot price of cotton during the acquisition period is calculated under the target price subsidy policy of Xinjiang cotton, and the total amount of cotton subsidy funds in Xinjiang decreased in the current year or next year, reducing the national financial expenditure.

At present, the quantity of zhengmian warehouse receipt (including effective forecast) is 22706, or about 976 thousand and 400 tons, which is close to last year's maximum of about 990 thousand tons. The annual registered total volume of zhengmian warehouse receipt in 2019/2020 is higher than that of the previous year. Along with the increase in the number of registered cotton warehouse receipts forecast in 2019/2020, Zheng cotton's contract delivery pressure in January continued to expand. After the main contract was transferred to May, the price difference between Zheng cotton 2001 and 2005 contracts was convergent.