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According to a report by the Futures Daily on April 19, at present, factors such as whether the State Reserve cotton auction is open and whether additional quotas are issued are limiting the price increase of Zheng cotton. In this context, the rise and fall of domestic cotton prices are easily affected by the replenishment cycle.
In the recent period, the trend of domestic and foreign cotton has deviated significantly. ICE cotton has continued to rebound, rising by more than 10.7% from the low point in early April, while domestic cotton futures have only increased by 2.74% over the same period. Domestic cotton prices are weak, because domestic cotton spinning companies have lowered cotton yarn prices, lowered inventories, and reduced cotton purchases, and they were also affected by national cotton reserves and quota factors. Under the background of sufficient domestic cotton supply, the trend of cotton "cowhide" will continue, until the downstream replenishment cycle restarts, there will be a greater rebound in the market.
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Downstream companies are still destocking
The replenishment cycle of cotton spinning enterprises in early March brought the price of cotton yarn to a higher level. The price of cotton also rose to more than 17,000 yuan/ton, and the spinning profit was also 4,000 yuan/ton, which was a new high since 2015. However, subsequent cotton yarn orders did not keep up. Most cotton spinning enterprises just maintained their previous orders. The cotton yarn industry gradually destocked and randomly lowered cotton yarn quotations. 32 cotton yarns were lowered from 25,780 yuan/ton in early March to 24,110 yuan/ton (quoted on April 16), down 1670 yuan/ton. Correspondingly, 328 cotton was also reduced from 16,820 yuan/ton to 15,360 yuan/ton (quoted on April 16), down 1,460 yuan/ton, but the price difference between cotton and cotton yarn is still as high as 8,750 yuan/ton, spinning profit is at a historical high Level, obviously there is room for further compression. If the spring demand does not keep up, in order to seize market share, textile companies may lower the price of cotton yarn or even lose sales, which is not conducive to the rise of cotton prices.
From the cotton 328 index and cotton yarn inventory days in textile mills, there is an obvious positive correlation between the two, that is, the demand for cotton yarn affects the price of cotton, or the price of cotton affects the purchase of cotton yarn. Before 2020, it can be seen that the cotton yarn inventory data lags behind the cotton price. After that, the cotton price lags behind the cotton yarn inventory days, that is, after 2020, the demand is leading the change in cotton prices. Cotton spinning enterprises are still destocking, and they may start replenishing inventory at the level of August last year, or they may begin replenishing inventory soon, but I think the former has a higher probability, at least not yet seeing a significant increase in orders. news.
Slightly reduced planting area
From the survey of cotton planting intentions, cotton planting areas in my country and the United States have decreased slightly. According to the survey results of the National Cotton Market Monitoring System, China’s intended cotton planting area will be 45.426 million mu in 2021, a decrease of 256,000 mu or 0.6% year-on-year; the US Department of Agriculture’s report at the end of March concluded that all cotton planting areas in the United States are expected to It was 12.036 million acres, a decrease of 56,500 acres year-on-year, or 0.46%, which exceeded market expectations.
In the context of small reductions in cotton planting, the US Department of Agriculture predicted in its April supply and demand report that global cotton production in 2020/2021 will be 24.612 million tons, a decrease of less than 30,000 tons from the previous year; consumption will be 25.658 million tons. , An increase of 3.248 million tons over the previous year, the global cotton supply and demand gap is 1.046 million tons, the inventory consumption ratio is still as high as 79.30%, and China's inventory ratio is 95.25%, which is much higher than the 67% in June 2018. Therefore, even if the global epidemic prevention and control situation turns for the better, it is not enough to only rely on a warmer demand to change the supply-demand relationship. The supply needs to decrease to increase the rising factor.
ICE cotton is difficult to replicate the same period in 2018
Since the outbreak of the new crown pneumonia epidemic, ICE cotton has bottomed out and has risen to a high of 95 cents per pound, and the fund has begun to reduce its long cotton orders. On February 23, the fund's net long orders reached 97,000. At this time, the closing price of ICE cotton was 92.58 cents/lb, and the number of long orders continued to decrease until March 9th and then began to increase slightly. However, in the last three weeks, as the price of ICE cotton has continued to fall, the fund has lightened its position all the way. On April 6, the fund held 74,000 net long orders.
From the spot side of U.S. cotton, the progress of U.S. cotton sales is more than 90%, similar to the same period in 2018. Before the May contract expires, if the fund uses the subject matter of the shortage of spot to force traders to move positions or order prices, there will be May raise futures prices again. However, unlike the current situation, the fund continued to increase long positions during the price increase at that time, and the net long position reached 118,000 lots. However, the current net position of the position does not match the increasing position trend. If the fund does not increase the position of cotton in the next few weeks, the probability that ICE cotton will form a high point in the first half of the year at 95 cents/pound is very likely to be established.
At present, there are still many factors restricting the rise of cotton prices, such as whether the national reserve of cotton is rotated, whether quotas are issued, whether the epidemic situation restricts cotton demand, etc. The rise and fall of domestic cotton are easily affected by the replenishment cycle, and the short-term rise will occur again. Not much space.