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With the promotion of funds, can the effective breakthrough of the previous platform Zheng Mian be realized?

Time: January 04, 2020 09:42:39 Zhongcai
Recently, the volatility of Zheng Mian has increased. Under the impetus of capital, he effectively broke through the early platform and brought up the volume, which caused the market to pay close attention. Starting from the fundamentals of cotton, considering the future domestic cotton planting intentions, cotton stocks, and downstream yarn production and stock situation, the author believes that Zheng Mian has not yet reached the cloud.

Domestic cotton planting intentions fell year-on-year. The national cotton market monitoring system launched a nationwide special survey on cotton planting intentions in mid-late November last year. The sample involved 15 provinces (autonomous regions), 50 cotton-growing counties (cities, and farms), and more than 1895 A fixed point of cotton planting information to contact households. The survey results show that in 2020, the national cotton planting area is 45.875 million mu, a year-on-year decrease of 2.068 million mu.

The cotton planting area in the northwest inland cotton area was 35.205 million mu, a year-on-year decrease of 1.3%. Among them, Xinjiang intends to plant cotton area of 34.927 million mu, a year-on-year decrease of 1.1%. The cotton planting area in the middle and lower reaches of the Yangtze River was 3.947 million mu, a year-on-year decrease of 19.5%. The area of cotton planted in the Yellow River Basin was 6.348 million mu, a year-on-year decrease of 8.2%.

There are two main reasons for the decline in cotton planting intentions: First, the decline in the purchase price of seed cotton has caused the farmers' enthusiasm to grow. According to data from the National Cotton Market Monitoring System, as of November 30, 2019, the average purchase price of seed cotton in the Mainland in 2019/2020 fell by 12.5% compared with the same period of the previous year, and the average purchase price of Xinjiang seed cotton fell by 23.9%. The second is that the later policies are still unclear. 2019 is the last year when Xinjiang ’s cotton target price subsidy will be implemented for “three years”. The policy in the later period is not clear, and it will also affect the enthusiasm of cotton farmers.

In general, as long as there is no significant decline in cotton planting intentions in Xinjiang, domestic production will eventually be relatively stable.

The polarization of cotton stocks has been severe. In the past two years, cotton warehouse receipts have hit record highs. Since November 2019, the growth rate of warehouse receipts has accelerated significantly. As of December 31, 2019, the number of registered warehouse receipts by Zhengshang was 26,591. 6,503 sheets are forecast, with a total of 33,094 warehouse receipts, equivalent to about 1.32 million tons of Zhengmian spot, which is the highest value for Zhengmian warehouse receipts since data are available, and is in the process of continued growth. Some people in the industry speculate that the total amount of warehouse receipts may reach a historical level of 35,000, and the spot will reach 1.4 million tons at that time, accounting for about 24% of the new cotton output in 2019/2020. Therefore, the pressure of the warehouse receipt on the disk cannot be ignored.

In addition, the commercial inventory of cotton in November 2019 was about 4.5 million tons, a year-on-year increase of 5.48% and a month-on-month increase of 39.46%, which was the highest in the past 10 years in the same period. At the same time, the cotton industry's inventory in December 2019 was only 27.4 days, a year-on-year decrease of 27.13% and a month-on-month decrease of 4.53%, which was the lowest in the same period in the past five years.

It can be seen that cotton is currently concentrated in the hands of ginners and traders, and the raw material inventory of the mill is extremely low. If the mill does not actively replenish the raw material inventory in the future, Zheng Cotton will not have enough motivation to continue to break through. Make a comeback.

Yarn output declines. Inventories remain high. In November 2019, the national yarn output was 2.614 million tons, a year-on-year decrease of 4.18%, and a month-on-month increase of 5.11%. The cumulative yarn production from January to November was 22.436 million tons, a year-on-year decrease of 13.68%. It is expected that Yarn production in 2019 will decline year-on-year. The national yarn output in 2018 was 28.658 million tons, a year-on-year decrease of 22.37%. It can be seen from the month-on-month change trend of yarn production that there is a clear downward trend. The domestic yarn inventory in November 2019 was 23.87 days, a year-on-year increase of 20.3%, and a month-on-month decrease of 12.1%, which was at a historical low in the same period.

In summary, the survey results of the decline in domestic cotton planting area in 2020 have limited substantial impact on cotton fundamentals. At present, cotton warehouse receipts and commercial stocks are at historically high levels in the past five years, while industrial stocks are at historically low levels. At the same time, yarn production has declined and corporate inventories have been high, indicating weak downstream demand. In addition, the traditional textile holiday window period has arrived, and Zheng Cotton has fallen. The pressure remains. From a technical point of view, Zheng Mian quickly pulled up in the short term, and it is not easy to chase up. After it stabilizes, it can be sold short. (Author: Qianhai Futures)
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