In 2019, Zheng cotton followed the overall downward trend of US cotton. In June, due to the hype of early low-temperature weather, Zheng cotton had a wave of gains, and then it was shrouded in Sino-US relations. Amid repeated shadows, downstream demand has been sluggish. Until the end of the National Day holiday, as external disturbance factors eased and expectations of a reduction in Xinjiang’s cotton production fermented, cotton prices rebounded driven by funds. The speculation about the purchase and storage expectations before the implementation of the state reserve cotton purchase and reserve also supported the rebound in cotton prices. However, As new cotton continues to come on the market, the supply is relatively sufficient, and the purchase and storage policy is less than expected, causing cotton prices to return to weakness. For 2019/2020, what is the pattern of the domestic cotton market? What potential changes have occurred? The author made some summaries and thoughts on this.
Domestic supply is forecast to exceed demand in 2019/2020
According to the Based on the weighted average calculation of the cotton planting area of cotton farmers surveyed, the total national cotton output is expected to be 5.9057 million tons, a year-on-year decrease of 3.35%, the same as the previous period; in terms of regions, Xinjiang’s output is 5.0395 million tons, a year-on-year decrease of 1.9%; the Yangtze River Basin’s output is 360,500 tons , a year-on-year decrease of 11.34%; the predicted output of the Yellow River Basin is 467,000 tons, a year-on-year decrease of 9.84%. Based on the changes in industrial and commercial inventories from December 2018 to September 2019 and the import volume and reserve cotton output from January to September 2019, it can be roughly estimated that the cumulative domestic cotton consumption from January to September 2019 was 5.4306 million tons, with a monthly average The consumption is 603,400 tons. From this, the annual consumption is calculated to be 7.2408 million tons. Since the downstream textile consumption is poor after entering October, the annual consumption is expected to be around 7 million tons, which may not be as high as the 8.1 million expected by the National Bureau of Statistics. Tons of optimism.
The “production reduction theory” is self-defeating, and lower costs bring about prices The fluctuation range moves downward
At the end of November, the national seed cotton picking and purchasing has basically ended. The purchasing price is lower than last year, and the processing volume exceeds the same period last year. Cotton output is expected to be around 6.16 million tons this year. The early “production reduction theory” was self-defeating, but all quality indicators of new cotton were worse than last year. Judging from the current processing progress, as of November 30, the total processing volume of 910 type 400 cotton processing enterprises across the country was approximately 3.507 million tons, a year-on-year increase of 0.65%. The total processing volume in Xinjiang was approximately 3.437 million tons, a year-on-year increase of 0.93%; among which, the local cotton processing volume was 2,165,695 tons, a year-on-year decrease of 4.10%, and the Xinjiang Corps cotton processing volume was 1,271,606 tons, a year-on-year increase of 10.83%. The total processing volume in the mainland was 69,276 tons, a year-on-year decrease of 11.36%.
At the same time, due to the promotion and popularization of machine-picked cotton, the cost of cotton cultivation in my country has also dropped significantly. Specifically, the purchase price of seed cotton in 2017/2018 was around 7 yuan/kg, of which the labor cost of hand-picked cotton accounted for 3.5 yuan/kg. With the increasing popularity of machine-picked cotton, the picking cost of machine-picked cotton is only 0.6 yuan/kg. According to statistics, as of November 30, the average purchase price of 3128-grade seed cotton by 400-type cotton processing enterprises nationwide was 5.50 yuan/kg, a year-on-year decrease of 15.90%. The purchase price of Xinjiang seed cotton is 5.41 yuan/kg, a year-on-year decrease of 16.77%. The average processing cost of machine-picked cotton in Xinjiang in 2019/2020 is about 12,200 yuan/ton. The downward shift in costs will also bring about an overall downward shift in the price fluctuation range.
The narrowing of domestic and foreign cotton price differences may become the norm
Affected by the trade war Affected by factors such as , the macro environment and the depreciation of the RMB, the domestic spot market is generally relatively light. The international cotton market is stronger than the domestic market. The spot price of domestic and foreign cotton has once again inverted. In early December, the domestic price was 150-200 yuan/ton lower than the international 1% tariff price. There is no competitive advantage in cotton customs clearance. Domestic resources are likely to be consumed first in the later period, which will benefit the lint cotton spot market. Since the beginning of this year, the price difference between domestic and foreign cotton prices has narrowed and lasted for a long time. The strategy of expanding the price difference between domestic and foreign cotton has failed. It is expected that under the background of sufficient domestic supply and a downward shift of the cost center, domestic cotton will gradually integrate with international cotton and become more competitive. It has gradually emerged that the narrowing of the price difference between domestic and foreign cotton will be a long-term state. This is also the first step for domestic cotton to participate in the international market.
Affected by the narrowing price difference, the quantity of imported cotton decreased significantly at the end of 2019. According to customs statistics, my country imported 73,000 tons of cotton in October 2019, a decrease of 12.47% from 83,400 tons in September and a year-on-year decrease of 32.34%. The cumulative imports from January to October 2019 were 1.5882 million tons, an increase of 29.42% compared with 1.2272 million tons in the same period of 2018.
The production of cotton yarn is also worthy of attention. Is cotton yarn production competitive? At present Mainly focusing on upstream raw material prices and electricity charges. In the context of China’s cotton prices gradually becoming competitive, focusing on electricity charges, we can see that China’s Xinjiang’s electricity charges advantage is huge. Therefore, it is expected that in the future, Xinjiang cotton yarn will gradually occupy a larger share. In the large market, the advantages of domestic cotton yarn will gradually be reflected. At the same time, we have also noticed that in the context of the Sino-US trade dispute, some downstream companies have moved to Southeast Asia. Against the background of prominent domestic cotton price competitiveness, it is expected that the pace of industrial transfer may slow down in 2020.
Potential threats from substitutes
In recent years, per capita fiber consumption has increased from 10 kg and 20 kg to the future.��30 kg, more and more chemical fiber clothing has entered life. At present, the per capita fiber consumption in developed countries is around 30 kg, and our country is also in the process of development. The price advantage of chemical fiber exists for a long time, and its diversity is suitable for various downstream needs, accounting for about 90% of the downstream market share. It is expected that chemical fiber products such as polyester staple fiber and viscose staple fiber will continue to seize the market share of pure cotton in 2020.
Due to the weakness of the downstream, the cumulative output of pure cotton yarn from January to October fell by 9.1% compared with the same period last year, and cotton blended yarn The cumulative output of the line decreased by 5.73% compared with the same period last year. Domestic cotton consumption in 2018/2019 dropped by 5.96% compared with 2017/2018. Considering that it will take a long time for downstream recovery and the impact of chemical fiber substitution, it is expected that cotton consumption in 2019/2020 will continue to decline by 2.8% on this basis. to about 7.85 million tons.
To sum up, the national cotton production in 2018/2019 is approximately 6.16 million tons , the expected production reduction did not occur, the purchase price of seed cotton fell, and the cotton price fluctuation range moved downward. Cotton industrial and commercial inventories are still at a high level during the same period, and upstream cotton and cotton yarn inventories are gradually shifting to gray cloth inventories. It is expected that the pattern of supply exceeding demand in the cotton market in 2019/2020 will be difficult to change. Only a substantial increase in downstream orders can drive cotton prices to rise in the long term. In addition, attention needs to be paid to the state’s cotton reserve policy, the trend of Sino-US relations and the reduction in consumption caused by substitutes.
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