Tang Zhen: Interpretation Of Cotton Rotation Announcement And Analysis Of Zheng Cotton Trend

In April 23rd, the joint Ministry of finance of the State Grain and material reserve bureau issued a notice on rotation of cotton reserves in 2019.

Taking this opportunity, we will analyze the policy details and their relationship with the market, and explore the new trend of the state in the policy of cotton reserves.

First of all, the announcement began with the words "to optimize the structure of reserve cotton and ensure good quality. Some central cotton reserves will be rotated in 2019".

These two words should be understood as two movements, one is to turn out and the other is to turn in.

For the market, it is to increase supply, turn round is to reduce supply, one is partial, the other is more.

Next is the arrangement of the reserve cotton wheel.

The details are quite clear. The total number of rounds is about 1 million tons, and the balance is put in about 10 thousand tons per day. The price is the average value of 50% of the domestic and foreign price indices, adjusted once a week. The time is from May 5th to September 30.

The number of rounds is less than that of last year. No matter the number of daily listing or total quantity and the time of rotation, it can be said that the number of rounds this year is much less than that of last year.

From the time cycle, we should not consider the extension of the new cotton market until the end of September.

Let's look at the arrangements for storing cotton wheels.

Compared with the rotation, the content of the entry is very simple. The original is "according to the actual output of the cotton reserves and the supply and demand of the cotton market, the relevant departments of the state choose the opportunity to arrange the rotation."

Among them, the number of rounds, the time of rotation, the cotton target and incoming price are not clear, and can only be understood and analyzed according to the literal meaning.

According to the announcement, "during the rotation process of the central cotton reserve, if the domestic and foreign cotton market has undergone major changes, according to the needs of market regulation and control, the State Grain and material reserve bureau will make necessary adjustments with the national development and Reform Commission and the Ministry of Finance on the rotation arrangement, and announce it later."

This description should reflect the maneuverability and variability of national policies, and make corresponding adjustments to sudden changes in the market. What is highlighted is that policies should keep the cotton market relatively stable.

The above is the analysis of the key points in the announcement of the cotton reserve policy.

Based on the information conveyed by the policy, we return to the current situation of the whole cotton market.

At present, the supply of cotton in China is relatively adequate, but by comparing the prediction of market inventory and consumption, the author thinks that before the new market is launched, domestic supply and demand will be close to equilibrium, or the quantity of supply exceeds demand.

At present, the quantity of Zheng cotton warehouse receipt is large. In the time of sufficient supply, only the price has the advantage to attract more buying, so the price of zhengmian has gone back to the inventory area from the hedging area.

In addition, the policy direction of the country is to hope that the market is relatively stable. Therefore, in the absence of other sudden factors, the probability of medium and short term Zheng cotton futures will be larger in terms of interval consolidation, and the upward pressure on the hedging area will also be supported by the downward flow of cotton, and the linkage between domestic and foreign cotton prices will be stronger in the future.

In addition, at present, the main position of Zheng cotton's main contract has not yet completely withdrawn. There may still be some expected differences in the market, mainly due to the progress of Sino US trade negotiations and the uncertainty of weather factors during the cotton growing season.

For the former factor, whether or not negotiations can be abolished is a moderate plus factor.

For the latter factor, if there is a big problem in the weather, the expected reduction in production will be a great plus factor.

However, because of the uncertainty of the two, the market still needs psychological preparation.