Cotton prices are falling again! Aftermarket: Do not abandon, do not give up!

After the escalation of Sino-US trade frictions, the market demand for domestic cotton is expected to decline, and domestic Zheng Mian began a two-month decline trend. Earlier this month, the calls from the top leaders of China and the United States gave the market good expectations, and Zheng Mian fell into an oscillating trend. The trade frictions between China and the United States remain uncertain, and market worries about downstream consumption capacity remain a major driving force behind the decline in cotton prices.



Recent decline of ICE cotton < br/>


In November, USDA's supply and demand report showed that US cotton production was reduced by 1.35 million bales due to hurricanes in the southeastern region of the United States, while domestic consumption and export estimates were reduced by 100,000 bales and 500,000 bales respectively. The main reason for the reduction of export forecast is that our country continues to break the contract. Affected by Sino-US trade frictions, Chinese buyers did not extend the contract to the next market year, but cancelled it directly.



According to the latest weekly U.S. cotton export report, the net contracted volume of U.S. cotton exports in 2018/2019 was 153,000 tons, 26% less than the previous week. Among them, China has destroyed about 116,000 tons. Looking back, since the week of September 20, China has cancelled the US cotton import contract of 93.7 million tons for eight consecutive weeks. The profit from the reduction of US cotton production forecast was covered by market concerns about demand. The recent fluctuation of ICE cotton fell, and the main contract in December fell again below 78 cents/pound.



Domestic new cotton sales are slow < br />.


The domestic textile industry is significantly affected by Sino-US trade frictions, coupled with Zheng Mian's sharp decline, the downstream raw material procurement willingness is not strong. After the new cotton was listed in large quantities, the domestic cotton stock increased rapidly, and the commercial stock ring ratio and year-on-year increase significantly. By the end of October, the domestic commercial cotton stock was 2.97 million tons, a significant increase of 78.9% annually, an increase of 54.2 percentage points over the previous month, a significant increase of 56.6% over the previous month, and an increase of 17.8 percentage points over the previous month.



The picking rate of new cotton in China is about 90%. Cotton ginning mills are limited by factors such as slow capital and lint sales. Their enthusiasm for acquisition is not high. The delivery rate of new cotton in China has dropped by 1.8 percentage points over the same period last year. At the same time, due to sufficient cotton stocks and weak downstream consumption, the sales rate of new cotton is only 13.6%, down 0.5 percentage points from the same period last year, which is significantly slower than the average value of the past four years of 6.8 percentage points. Sales have slowed down compared with the beginning of this month.



Focus on G20 Summit Content



Gold Nine Silver Ten rdquo is the traditional consumption peak season of textile industry. However, influenced by Sino-US trade frictions, the domestic textile industry has obviously changed from prosperity to weakness since mid-late September. Since the beginning of August, the domestic yarn and grey fabric start-up rate has been increasing day by day; during the same period, both stocks have slowly declined. This phenomenon has continued until the arrival of a tariff policy on $200 billion of commodities. After a short period of stabilization, the start-up rate began to decline, while inventory showed an upward trend. According to the industry prosperity data, the purchasing managers'index of domestic cotton textile industry declined continuously in September and October, 45.98 and 42.03, respectively, which were the lowest in the same period in recent three years.



The trade frictions between China and the United States have also brought great uncertainty to the normal economic and trade cooperation between the two countries. The 124th Canton Fair just concluded fully illustrates this point. The Canton Fair has always been a barometer of the import and export trade of the Mainland, while the volume of the Canton Fair's exports to the United States dropped by 30.3% year on year. At present, in order to get through customs before 25% tariff landing, Sino-US enterprises with trade exchanges have accelerated the delivery process of orders. At the same time, due to the uncertainty of trade frictions, the phenomenon of buyer's underpricing is more obvious. With the approaching of 25% tariff landing time, China's orders to the United States will further decline without substantial improvement in Sino-US trade frictions.



At present, the focus of market attention is the meeting between the leaders of the G20 summit at the end of this month. If there is no clear conclusion at that time, market confidence will be hit again. Nevertheless, investors should not be too pessimistic. The market is bullish in the early days of the year. The stock of China has fallen to the safety line and the gap between production and demand. The factors still exist, which will support cotton prices to a certain extent.