Domestic And Foreign Cotton Market Supply And Demand Side Loose Period Price Rebounding Limited Space

In recent years, Zheng cotton's main contract weakened slightly after finishing, and the domestic cotton market fundamentals continued to be weak, but there were supporting factors underneath. There is a demand for lint purchase through the inventory of finished products and the reduction of raw material inventory. Reserve cotton has been coming out in a row, and the margin is decreasing, supporting cotton prices. The price difference between cotton and polyester is low, and the substitution effect of short fiber on cotton is weakened. Zheng cotton market warehouse receipts accelerated outflow, solid disk pressure reduced.

A few days ago, Zheng cotton rose tentatively, but the market confidence was still insufficient and the increase was relatively moderate. Yesterday, China and the United States will launch a new round of negotiations at the end of the month, which has a positive effect on cotton market. This week, the US cotton export report data is more positive than last week, which also boosted the price. I believe that the dynamics of Sino US economic and trade consultations will continue to affect the trend of the disk and require sustained attention. There is support under the short-term Zheng cotton, but under the premise that no significant positive events have occurred on the basis of the basic situation, the domestic and foreign cotton market supply and demand are relaxed, so that the price does not have the conditions for a sharp rebound.

Cotton is expected to be abundant in the new season. The latest USDA7 supply and demand report raised the initial inventory of global cotton in June from 77 million 530 thousand packages estimated in June to 79 million 270 thousand packs. The world's cotton output increased by 470 thousand packs compared with the June estimate, and the consumption was reduced by 1 million packages. The final inventory was increased by 3 million 160 thousand packs compared with the previous estimate.

In terms of supply and demand in the main producing countries, in the July supply and demand report, the end of the year 2019/20 inventory in the US increased by 300 thousand packs to 6 million 700 thousand bales in June, reaching a more than ten year high. The latest US weekly crop report shows that the excellent and good rate of US cotton was 60% in the week ending July 21st, compared with 56% in the previous week, 39% in the same period last year, and the excellent and good rate has reached a high level of nearly 6 years. The annual output of US cotton 2019/20 is expected to be 947 pounds / acre, lower than the 968 pounds / acre of the previous year. The demand for American cotton is slightly weak. As of July 11th, 2018/19 cotton sold 15 million 370 thousand packs in the United States, less than 16 million 319 thousand packages in the same period of the previous year, and the total number of shipments to China's exports to the US has also declined significantly compared with the same period last year. Cotton growing in India is faster than the same period last year, and cotton production in the new season is expected to increase. China's cotton output is expected to decline by 3% to 5 million 930 thousand tons this year, and its output is relatively stable.

Domestic lint inventory was higher than last year, and inventory consumption was slow. As at the end of June, cotton industrial and commercial inventories totaled 4 million 27 thousand and 200 tons, a decrease of 252 thousand and 500 tons compared with the same period, an increase of 942 thousand and 200 tons compared with the same period last year. As of July 24th, the total number of cotton reserves was 549 thousand and 600 tons this year, with a turnover rate of 88.35%. In this year (2018.9-209.6), China has imported 1 million 780 thousand tons of cotton, an increase of more than 70% over the same period last year. According to the national cotton market monitoring system, as early as the beginning of July, the number of days available for yarn storage was 29.1 days, an increase of 15.3 days compared with that of the previous year, and the number of days available for cloth inventory was 49.2 days, an increase of 16.6 days compared with the same period last year.

On the whole, although the recent Sino US economic and trade consultations have some positive news, the lifting effect on domestic cotton market is relatively limited. The outlook for global cotton supply is better and demand is expected to be weak. Domestic lint stocks are on the high side year-on-year, new flowers are on the market, and downstream products need to be stored for a few days. Short term cotton prices still do not have the conditions for a big rebound.