Cotton Futures Market Trend Is Expected To Better

The Spring Festival is approaching. The textile workers who have worked hard for a year have begun to make year-end summaries. Generally speaking, it is hard to do in 2019. The profits of large enterprises with long industrial chains can still be tied up with last year, and small and medium-sized enterprises generally lose money. After the conclusion, enterprises are ready to take a vacation. According to our research, weaving enterprises generally stop production from ten to twenty in the early part of the month. Cotton spinning enterprises stop production from twenty to twenty-nine in the twelfth lunar month, and the production time is concentrated at the beginning of the beginning of the month from six to eighth. Before the Spring Festival, the stock of cotton yarn is more than 20 to 30 days, and the stock of cotton is between 30 and 60 days. For the cotton yarn market after the Spring Festival, market participants generally rose, for the following reasons:

Long fall to meet rebound


Since June 2018, cotton prices at home and abroad have gone through a year and a half of the bear market, with the Zheng cotton index falling by 37.8% and the US cotton index down by 40%. After the crash, there must be a big rise. Since October 2019, with the improvement of Sino US trade relations, cotton prices have gone down and rebounded. Among them, Zheng cotton has risen by 16.13%, and the start time of US cotton rebound has been 20 days ahead of Zheng cotton, and the increase has been extended to 20.8%.

With the upward movement of cotton's center of gravity, the market confidence has improved significantly under the influence of "buying and selling but not buying down". In December 2019, the downstream cotton spinning enterprises even took the initiative to replenishment, boosting the Zhenggang period's resonance rise, and the 3128 grade lint spot rose to 10.84%.

Raw material prices raise cotton yarn

In the lower reaches of the market, demand downturn, cotton yarn market started slowly, in late December 2019, cotton yarn prices officially entered the rising channel. During this period, three rounds rose in late December 2019, around New Year's day and early January. Although the volume of orders before the Spring Festival can not be enough, but because of the continuous improvement of raw material prices, cotton textile enterprises continue to bullish, the atmosphere of warming up, some enterprises do not receive large orders before the festival, only small orders; some enterprises accelerate the accumulation of cotton yarn inventory, the new year's Eve will stop production 1 to 3 days, after the festival will be based on inventory situation, start 1 to 7 days. However, sales of products generally resumed earlier, mostly in the early six to early eighth.

Cotton textile enterprises actively stocking

Since the improvement of Sino US trade relations in October 2019, with the increase of raw material prices, especially since December 2019, raw material prices have increased rapidly, cotton textile industry chain is expected to improve, cotton yarn goes to inventory speed and cotton textile enterprises profit is restored. In addition, near the Spring Festival, cotton spinning enterprises are actively stocking up. As of January 19th, cotton textile enterprises in Shandong were able to store stocks for 45 days, and some large enterprises had higher inventories, from 60 to 90 days, while some small and medium-sized enterprises had low inventories, less than 30 days. At the same time, the local cotton spinning enterprises' stock of cotton yarn is 25 days. It is estimated that cotton spinning enterprises will resume production in the first six months from the beginning of the month. However, logistics and transportation resumed normally after the Lantern Festival. It is estimated that the cotton yarn of Shandong cotton textile enterprises will continue to be stored for more than 30 days.

In addition, the price of imported yarn is rising and the central bank has dropped to a certain level to boost cotton spinning market to a certain extent. In January 16th, China and the United States signed the first stage trade agreement. With the landing of the agreement, the downstream orders will no longer wait and see. Orders after the Spring Festival are expected to be blowout, and the cotton yarn market will also usher in a "little spring".

Although cotton prices continue to rise, the problem of lower price pressure is prominent, and some weaving enterprises are turning to chemical fiber products. For example, before the Spring Festival, a pure cotton production enterprise received 70% of the foreign trade orders. The order was maintained until March, but the price of foreign trade was serious. In order to save costs, the company intended to switch to cotton cloth. In addition, the signing of the first stage agreement between China and the US means the easing of short-term trade frictions, but it is by no means an end. Therefore, although the cotton yarn market is expected to be better after the Spring Festival, we should also be cautious. For textile people, we should do well in internal strength and make good use of hedging tools such as futures and options, so as to cope with the possible trade friction that may occur again in the later stage.