De Inventory Progress And Evolution Zheng Cotton Rise Highly Restricted

Recently, Zheng cotton market has a "desire" to rise, which is related to the "golden nine" consumption season and the drought weather of American cotton. However, in the overseas new crown pneumonia epidemic situation has not been effectively controlled, as well as cotton high inventory situation, zhengmian rise is highly limited. However, in the long run, due to the next year's production decline and consumption increase, Zheng cotton has the potential to rise sharply.

De stocking progress and evolution

Up to now, the domestic commercial inventory of cotton is around 3.2 million tons, lower than the same period last year. However, this inventory is still very large, if the futures prices rise sharply, there will be a large number of hedging.

In terms of warehouse receipts, as of August 5, zhengmian registered warehouse receipts equivalent to 703000 tons of cotton, with a continuous decrease in weekly ratio. Registered warehouse receipts peaked at 1.5 million tons in February. At present, the registered warehouse receipts have dropped by more than half, indicating that there are end-user point purchase.

In terms of selling and storing, the transaction is still positive. As of August 5, the total number of cotton auctions of CSC was 215000 tons, with a turnover rate of 100%. According to the plan, the cotton rotation time of the central storage company is from July 1 to September 30, and the total amount is about 500000 tons. In terms of national reserve inventory, the remaining 1.74 million tons in autumn of 2019 is less than the safety level of 3 million tons. At the end of March this year, 370000 tons of Xinjiang cotton were transported by the State Reserve Bureau. If we add 200000-300000 tons of imported cotton that has not been announced, the remaining stock of the National Treasury is 2.35 million tons. If the total stock of 1.85 million tons is sold to the end of September, the remaining stock will be sold at the end of September. It can be seen that the inventory level is on the low side and further rotation of imported cotton is not ruled out.

Interpretation of USDA report in July

According to the latest USDA data in July, China's new cotton production in 2019 / 2020 will be 5.94 million tons, which will remain unchanged; consumption will be reduced from 1.43 million tons to 7.18 million tons due to the epidemic situation; the gap between production and demand will be reduced to 1.24 million tons, and the final inventory will rise to 8.05 million tons (inventory / consumption ratio is 112%). It can be seen that Sino US trade friction and epidemic situation have a great impact on China's clothing export and cotton consumption.

It is estimated that China's cotton production will be 5.77 million tons in 2020 / 2021, and the consumption will be 8.06 million tons; the gap between production and demand will be 2.28 million tons, plus the import of 1.96 million tons, the final inventory will drop to 7.7 million tons (the inventory / consumption ratio is 96%). Therefore, the price of cotton is expected to rise in the long run.

In August, Zheng cotton market has gradually entered the traditional consumption peak season, and the price has a "desire" to rise, but it will encounter the resolute suppression of hedging plate. By the middle of September, Zheng cotton market will face two challenges: one is the delivery of the contract in September, with an estimated delivery volume of 500000 tons; the other is that the domestic cotton has entered the harvest season, and the seasonal listing pressure will continue until the end of the year. After December, the pressure of new cotton listing has been released, and at the same time, the winter purchasing and consumption peak season is coming. At that time, Zheng cotton is expected to produce a wave of spring rising market driven by the traditional stock preparation.