The gap between production and demand in the new year is expected to drive up cotton prices
Jul 26, 2019 ｜ by CT
Since the beginning of April, cotton planting has been started in various cotton areas in China. So far, cotton planting has been completed in 2019. According to the estimates of the Market Early Warning Expert Committee of the Ministry of Agriculture and Rural Affairs, the cotton planting area in China declined in 2019. Cotton prices at home and abroad have fallen sharply recently. It is expected that the cotton market prices in China will rebound before the opening of the new cotton market year. The cotton target price reform is coming to an end, the late market faces many situations that need to be considered and solved. Planting income declined, and planting area is expected to decline in 2019.
At present, supply and demand are loose and prices are under great downward pressure.
From September 2018 to April 2019, the domestic standard grade (3128B) cotton price fluctuated from 16,313 yuan/ton to 15,660 yuan/ton, the downstream textile and apparel exports were not strong, the purchase enthusiasm of cotton enterprises was not high, the price fluctuation of cotton declined, and the market participants were in a serious wait-and-see mood.
At present, the loose market situation of supply and demand has exerted tremendous downward pressure on cotton prices. Especially, the Sino-U.S. economic and trade frictions are becoming more and more intense, the market uncertainty is increasing, and the confidence of the operators is insufficient. The main contract of Zheng Mian futures also fell sharply in the middle and late May. Follow-up market prices will be mainly affected by the progress of trade negotiations and weather speculation during the growth period of new cotton, and may also cause periodic market price volatility. And with the new year approaching, the gap between production and demand is expected to drive cotton prices up.
Effectively guarantee the reasonable industrial distribution and the stable operation of the market.
There are still some questions worth thinking about. One is how to fill the gap between domestic production and demand. China’s annual cotton production and demand gap will exist for a long time, cotton supply in 2019/20 is obviously insufficient, cotton import demand will be concentrated in the second half of this year or next year. The policy of rotation of reserve cotton and the policy of sliding duties quota need to be arranged as a whole in advance. On the one hand, the policy normalization stabilizes market confidence, on the other hand, the implementation time is flexible to avoid market price fluctuations. Second, how to guarantee the production capacity when Xinjiang’s policy expires. 2019 is the closing year of deepening the cotton target price subsidy policy. The next stage of policy adjustment will be related to the production scale of cotton in Xinjiang and the level of cotton self-sufficiency in China. Third, how to implement the industrial support policy in the inland cotton areas. How to integrate the existing cotton production subsidies, formulate efficient use methods, and effectively support the sustainable development of cotton production in the inland is another key path to ensure the rational distribution of domestic cotton industry and the stable operation of the market.
