Sino US Trade War Again Upgraded Cotton City A New Round Of Decline Opened

Recently, Zheng cotton main force CF1909 contract broke down, down to 12225 yuan / ton limit in the afternoon, and again detonated the shock of cotton city. Just two days, Zheng cotton fell nearly more than 800 points, and continued to refresh the 3 year low.


From the US President Trump, a tariff will be added to China's $300 billion commodity in September 1st to declare China a currency manipulator. Since last week, China and the United States opened consultations again, Chinese enterprises began to buy American agricultural products. Yesterday, the NDRC and the Ministry of Commerce issued a voice. The State Council Tariff Commission has temporarily excluded import tariffs on new US agricultural products purchased after August 3rd, and Chinese related enterprises have suspended the purchase of US agricultural products. The rapid reversal of trade between the two countries has left many cotton traders in a fright.


The escalation of Sino US trade relations has brought about not only a sharp fall in cotton prices, but also a blow to confidence. Since May this year, Zheng cotton has opened the first round of limit, and at least a monthly limit has become the norm. To the entire cotton textile industry chain, from the inside to the deep blow, orders for terminal garments are reduced, yarn and grey fabric inventory is constantly accumulating, cotton spot is hard to sell, and enterprises' production and shut-down are increasing, including some enterprises transferring to Southeast Asian countries.


According to the national cotton market monitoring system data, as of August 2, 2019, the sales rate of new cotton in the 2018/19 year was 79.6%, down 9.2 percentage points from the same period, of which the sales rate of Xinjiang was 77.8%. According to the estimated cotton output of 6 million 105 thousand tons in China, there were about 1 million 245 thousand tons of new cotton sold in the country. Downstream domestic and export pressure intertwined, 1-6 months in 2019, the total retail sales of clothing shoes and hats and needle textiles increased by 3% over the same period last year, the growth rate dropped 0.3 percentage points compared with the first quarter of 2019, and the national textile and garment exports were 124 billion 231 million US dollars, down 2.37% from the same period last year. There are indications that cotton city has entered the "cold winter" season.


As a market weathervane national cotton store, in this round of Zheng cotton fall also echoed in time, trading volume prices fell, the industry's enthusiasm for storage is greatly reduced. In August 5th, China Cotton Reserve Management Co., Ltd. plans to sell 10 thousand tons of cotton reserves, and the average price will be 11974 yuan / ton, down 374 yuan / ton compared with the previous trading day, and the price of 3128B will be 13500 yuan / ton, down 119 yuan / ton compared with the previous trading day. Due to the sharp decline of Zheng cotton futures, spot price spot resources also dropped to low levels, and even individual low and strong Xinjiang cotton prices and reserve cotton leveling water, and more importantly, there were few downstream enquiries.


Looking at the current market, the upgrading of Sino US trade relations has brought a huge impact to the cotton market, but at present, the external market stabilizes and shocks, or will restrict the decline of Zheng cotton. In addition, attention should be paid to weather changes in cotton growing areas, and national policies remain variable. It is suggested that operators should be cautious and not easy to catch up.