What are the highlights of the international market in 2019/20?

Release time:

2019-07-24

In July, with the cotton planting in the northern hemisphere and the growing trend gradually "settled down"; The global cotton market in 2018/19 has been difficult to set off a big storm under the negative pressure of declining consumption and rampant tariff barriers. In the absence of the cooperation of cotton fundamentals and capital, ICE's main contract failed several times at 70 cents per pound.

The author believes that the outcome of the Osaka meeting between the leaders of China and the United States is a neutral preference. Although the United States suspends the imposition of tariffs on US $350 billion imports, the premise is that China is required to import a large amount of US food and agricultural products. Restarting trade negotiations is the common aspiration of both sides. From the point of view of all demand for cotton supply and demand, the external market environment and the Trump administration's global enemies, ICE's main force may still "reach the bottom" in the 65-70 cents/pound compartment before the end of August. Even if it breaks 70 in stages, it will be difficult for bulls and funds to hold on.

However, the author is more optimistic about the global cotton market in 2019/20, and ICE has a higher hope of returning 75 or even 80 cents/pound:

First, the cotton planting area and growth in the three major cotton-producing areas in the northern hemisphere are not ideal, which is lower than expected. 1. The problem of cotton in India is very serious. According to statistics from the Indian Cotton Association, as of June 25, India's cotton planting in 2019 was only 15% completed, compared with 90% in the same period last year. Due to the uncertain prospect of monsoon rain, 85% of India's new cotton has not been sown, so it is very difficult to predict the new annual output. Among them, Gujarat, Maharashtra and Madhya Pradesh may need to switch to other crops on a large scale. 2. The cotton planting area in the United States declined, lower than expected. According to the USDA report, the actual cotton sown area in the United States in 2019 was 13.72 million acres, a decrease of 2.7 percent year-on-year, of which the area of Piman cotton was 275000 acres, a decrease of 9.9 percent year-on-year; 3, China's Xinjiang cotton region cotton growth was weak over the same period. According to the survey, since mid-to-late June, affected by heavy rainfall, low accumulated temperature, extreme weather, Aksu, Korla and other southern Xinjiang cotton growth is not optimistic, the growth and development indicators are still slightly lagging behind the same period last year, significantly lagging behind the same period of the previous year;

Second, the world's monetary policy is facing a major adjustment, easing, inflation or the main tone, commodity futures are rising. Recent economic data in the United States has continued to weaken, including durable goods orders and initial jobless claims that have not met expectations. The market's expectation for a rate cut in July is 100 per cent, and the expectation of a 50 basis point rate cut is less than 20 per cent. Last week Federal Reserve Chairman Jerome Powell and Federal Reserve St. Louis Fed Chairman Brad hinted at a 25 basis point rate cut in July. In the European Union, Australia, Japan and South Korea and other developed countries have currency "water" situation, China's central bank will continue to use directional downgrade, downgrade response; central banks "flooding" will lead to further inflation;

Third, the southern hemisphere cotton to the United States cotton substitution dropped sharply, the United States cotton exports again into the market "weathervane". According to feedback from all parties, in 2019, Australian cotton production will not only decline by more than 50% year-on-year, but also the length, horse value, strength and other indicators will obviously decline, the substitution for C/A, M/E and other indicators will weaken, and the export will not have the ability to compete with US cotton in all directions. However, Brazilian cotton is likely to be "outside the golden jade, inside the wool"-the output will increase compared with the same period, however, due to a series of conditions such as acquisition, ginning, storage, transportation and shipping schedule, the opportunity to continue to challenge US cotton was lost. Moreover, due to the high planting cost and other aspects of Brazilian cotton, the price of new cotton in 2019/20 is difficult to be "unsatisfactory" compared with US cotton ".

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