Policies determine the general direction and the cotton market is highly volatile
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Flame retardant, fluorescent, clothing, fabric, cotton, policy
I. Market Industry Review in July
China II Quarterly GDP was the same year-on-year as the previous value, and China’s economy maintained stable growth momentum in the second quarter. In the first half of the year, the domestic economy faced complex domestic and international situations and continued downward pressure on the economy. While moderately expanding aggregate demand, it accelerated supply-side structural reform. The national economy was generally stable and making progress. Judging from the data, the national CPI rose by 1.9% year-on-year in June, 0.1 percentage points lower than the previous month. In June, the national industrial producer price fell by 0.2% month-on-month and 2.6% year-on-year. From January to June 2016, the national real estate development investment was 4,663.1 billion yuan, a nominal increase of 6.1% year-on-year (an actual increase of 8.0% after deducting price factors), and the growth rate was 0.9 percentage points lower than that from January to May. From January to June, my country’s import and export reached US$1,712.7 billion, a year-on-year decrease of 8.7%. Among them, exports were US$985.5 billion, down 7.7%; imports were US$727.2 billion, down 10.2%.
The overall trend of commodities in July was volatile, agricultural products basically maintained a volatile and weak trend, and cotton prices were relatively strong.
Domestic cotton, in terms of supply, the bidding for reserve cotton is active, the price increase continues to rise, the average transaction price has risen sharply, and has recently remained above 15,000, domestic new flowers Spot prices are tight and prices are firm. Cotton output is expected to still decrease in the new year. Xinjiang’s new flowers are growing well. Affected by heavy rains, the mainland’s output is expected to be slightly reduced. On the demand side, the sales price of cotton yarn has risen sharply, and cotton gray fabric companies have followed suit. However, end-use consumption is still poor, and textile and clothing exports continue to decline. It is expected that with the arrival of the peak season in September, the downstream situation will improve slightly. In early July, the price of Zheng cotton increased sharply, and domestic spot prices followed suit. Downstream cotton yarn and cotton gray fabrics also gradually followed suit.
In the international market, USDA raised the US cotton production in 2016/17, while significantly lowering the cotton output in India and Pakistan, raising China’s cotton consumption, and lowering China’s cotton inventory. and cotton stocks. The signing volume of US cotton in 2016/17 was relatively good, and the signing progress in 2015/16 was basically the same as in previous years. The tight spot supply in India and the reduction in cotton production in the new year have caused cotton prices to rise sharply, which has provided certain support for international cotton prices. ICE cotton futures prices rose sharply in July.
2. Floods hit the mainland, affecting cotton’s growth
June 2016 In August, the Cotton Farmers Cooperation Branch of the China Cotton Association and the Xinjiang Huatai Professional Cooperative conducted surveys on the growth of cotton seedlings in 2016 among 2,751 farmers in 12 provinces in the mainland and the Xinjiang Autonomous Region. The survey results show that in June, most of the country’s cotton is in the budding and flowering stages, and the incidence of diseases and insect pests is generally light. The northwest inland cotton area and the Yellow River Basin cotton area have better meteorological conditions, which is conducive to the growth and development of cotton; the Yangtze River Basin cotton area has frequent Heavy rainfall slows cotton growth and delays the growth period. Since cotton was sown, some cotton areas have suffered from meteorological disasters such as heavy rain, hail, drought, and sand dust, and the overall growth of cotton has been worse than normal. Calculated based on the weighted average of the cotton planting area of the surveyed cotton farmers, the national cotton planting area was 41.296 million acres, a decrease of 10.1% compared with the same caliber. As of the end of June, the national cotton budding rate was 83.85%, 10.3 percentage points higher than the same period last year. The incidence of diseases and insect pests was generally mild, with mild diseases accounting for 67.63%, an increase of 1 percentage point year-on-year; pests and diseases accounting for 50.51%. , a year-on-year decrease of 14.9 percentage points; those with better growth accounted for only 26.83%, a year-on-year decrease of 18.4 percentage points.
Since June, most cotton in Xinjiang has been in the budding to flowering stage, which is about 5 days later than normal. Among them, the growth period of cotton in southern Xinjiang is 2 days earlier than last year. -5 days or the same, some areas have already bloomed, while Northern Xinjiang is 5-10 days later than last year as a whole, and only a few well-managed cotton fields have achieved the goal of blooming in June. This year, the incidence of diseases in Xinjiang is relatively mild. 76% of the surveyed households believe that the disease is relatively mild, an increase of 6.73 percentage points from the same period last year. In June, as the temperature rises, the incidence of pests has intensified, and the surveyed households believe that the disease is relatively mild. The heavier ones reached 44.7%, an increase of 37.4 percentage points compared with the same period last year. In late June, due to high temperatures in some cotton areas in southern Xinjiang and widespread hail weather in Bozhou area in northern Xinjiang, cotton growth was affected to a certain extent. The overall seedling condition was worse than that in the same period last year, and those with better seedling conditions accounted for 23.20% of the households surveyed were 46.83 percentage points lower than the same period last year, and 48.70% of the households were in poor condition, an increase of 35.14 percentage points year-on-year. In accordance with the principle of “no time for branches, no time for branches”, topping work has already begun at the end of June and early July. Since the weather in the early period affects the growth of cotton, cotton farmers need to increase investment in management, fertilizer, etc. in the later period. , the cost of cotton planting will increase.
In June, the cotton areas in the Yellow River Basin generally entered the budding stage, and a few entered the early flowering stage. The growth conditions were better than those in the Yangtze River Basin. The precipitation in most cotton areas was lower than that in the Yangtze River Basin. There are more crops in the same period of the year, with suitable light and temperature, and good soil moisture. The early drought in cotton areas in Hebei and other places has been alleviated. The cotton growth and development period is slightly earlier than the same period, the budding time is earlier, and the disease incidence is lighter. As of JuneJudging from the situation, rainfall and temperature conditions are conducive to the growth of cotton this year, the new flower budding rate is high, and the seedling condition is generally good. As of July 17, the new flower budding rate was 77%, an increase of 20 percentage points from the previous week; the same period last year was 72%; the average in the past five years was 76%. The rate of new flowers and bolls was 28%, an increase of 9 percentage points from the previous week; it was 29% in the same period last year; the average in the past five years was 30%. The growth rate of U.S. cotton is 54%, compared with 54% last week and 57% in the same period last year. Judging from the current planting situation, if extreme weather does not occur this year, US cotton production will increase.
With the rise in cotton prices, especially in India and Pakistan, the sales progress of US cotton has also been rapidly followed. Vietnam, India and Pakistan have U.S. cotton purchases increased. As domestic cotton prices have also risen sharply, China has begun to increase its purchases of US cotton. According to USDA statistics, as of the week of July 14, the United States had contracted 2.0386 million tons of upland cotton in 2015/16, a year-on-year decrease of 18%, and shipped 1.7976 million tons. The signing progress of U.S. upland cotton was 107%, and the five-year average was 107 %, the shipment progress is 94%, and the five-year average is 97%. As of that week, the United States has signed contracts for 2016/17 upland cotton of 508,300 tons, a year-on-year increase of 24.6%.
3. Cotton prices in India continue to rise sharply, and cotton stocks are low at the end of the year
Entering July, cotton prices in India continued to rise sharply. As of around July 20, the delivery price at the S-6 ginning factory was quoted at 47,250 rupees/kandy, which is a discount of 90.00 cents/pound. Since the country’s domestic cotton stocks are low and new flowers will not be available until the end of October or early November, textile companies have begun to import US cotton, Australian cotton and West African cotton in large quantities. In addition, the cotton planting area in India is expected to decrease in the New Year and the sowing progress is lagging behind. This has also supported the sharp rise in cotton prices in India.
According to the 2015/16 supply and demand forecast report released by the Indian Cotton Advisory Committee, cotton production in 2015/16 was reduced by 1.4 million bales (238,000 tons) to 33.8 million bales (5.746 million tons). Exports decreased by 200,000 bales (34,000 tons) to 6.8 million bales (1.156 million tons); imports increased by 400,000 bales (68,000 tons) to 1.5 million bales (255,000 tons); consumption decreased slightly by 200,000 bales (34,000 tons), to 30.8 million bales (5.236 million tons). In addition, the amount of old cotton carried forward to 2015/16 has been adjusted, increasing by 0.8 million bales (136,000 tons) to 6.6 million bales (1.122 million tons). Therefore, although the supply for this year is reduced compared with the previous forecast, the ending stocks are increased to 4.3 million bales (731,000 tons).
As of July 14, India’s 2015/16 seed cotton market volume and lint cotton totaled 33.325 million bales (5.6653 million tons). According to Cotlook estimates, all The new flowers for 2015/16 are now on the market.
According to the Cotton Association of India, serious insect infestations in core cotton-producing areas, falling cotton prices during this year’s harvest, and good monsoon rains this year have prompted cotton farmers to switch to sugarcane, For peanut and bean crops, India’s cotton planting area will drop to a low of nearly seven years in 2016/17, about 165 million acres, and the cotton planting area will decrease by 7% year-on-year.
9. Summary and operational suggestions
From the perspective of Brexit, Turkey Coup d’état, repeated terrorist attacks on France, debt problems of Italian banks and other issues have occurred frequently, factors such as international political instability have increased, and the European economy is also facing huge challenges. The current economy is relatively good only in the US market, but in this international environment it is expected that its interest rate hike will be postponed. In terms of the domestic market, domestic real estate has significantly boosted my country’s GDP in the first two quarters, and the overall economic data has not declined significantly. However, foreign trade and investment are not in good shape. It is difficult for us to imagine new highlights that can boost GDP growth in the second half of the year. . Regarding the domestic economic situation in the second half of the year, we still maintain a wait-and-see attitude.
From the perspective of international cotton fundamentals, although cotton production increased in 2016/17, cotton stocks decreased significantly. International cotton prices have soared, and Indian cotton prices have skyrocketed. India and Pakistan have begun to increase their purchases of US cotton, which has provided certain support for international cotton. In the later period, it is expected that international cotton will fluctuate towards a stronger trend.
The domestic cotton market is still a policy market. If the stock-distribution policy remains unchanged and the marketed resources do not exceed 2 million tons, there will be a gap in domestic cotton supply in 2015/16, and the cotton reserve will end at the end of August. There will still be a gap of two months before Xinjiang cotton is launched in large quantities. Textile Enterprises need to stock up in advance, so it is expected that the transaction of reserve cotton will still be hot in the later period. However, judging from the current market volume of reserve cotton, increasing the amount in the later period is a high probability event. If the reserve cotton policy is only to increase the amount and maintain 30,000 tons per day, and the auction is still ended on August 31, then the reserve cotton market volume will be large. An increase of 300,000 tons is only a short-term negative for the market. In the long term, even if it can meet the gap before the launch of new cotton, the expected opening price of new cotton will not be low, so the impact will be a correction first and then It will fluctuate and strengthen again. If the amount of cotton reserves is not only increased but also the release period is postponed, textile companies will not have to worry about cotton supply problems. Cotton in the hands of a large number of traders will gradually flow into the market, and Zheng cotton will weaken.
：China Textile Network
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