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SunSirs: Desert Locust Outbreak in East Africa and West Asia, Chinese Zhengzhou Cotton was Trading
February 19 2020 10:15:12SunSirs(Linda)

According to statistics of SunSirs, as of February 17, the average price of domestic lint spot market was 13,429 RMB/ton, down 0.14% month on month (February 10), down 13.49% year on year. The turnover heat of domestic reserve cotton has dissipated, desert locusts rarely break out in East Africa and West Asia, and Zhengzhou cotton was increasing.

On February 17, Zhengzhou cotton 2005 main contract was trading, with the lowest intraday price of 13,055 RMB/ton and closing price of 13,510 RMB/ton, up 520 RMB/ton or 4.00% compared with the previous trading day, with 636,829 transactions and 513,807 positions.

Positive factors

At its annual meeting on February 16, the National Cotton Council (NCC) predicted that in 2020, the US would plant 13 million acres of cotton, down 5.5% year-on-year. With cotton prices falling this year and corn and soybean prices rising, American farmers' intention to grow cotton has weakened. As the largest cotton exporter, the United States reduced production or boosted cotton prices.

With the epidemic under control and the conditions for returning to work gradually improved, cotton consumption is expected to pick up. From the single day turnover of reserve cotton back to 7,000 tons, there was no deal on February 17. Trading volume price is far less than the initial resumption of work, traders are now more wait-and-see mentality, spot prices nearly a week basically flat.

Heated topics

African locusts have entered western Asia, many countries have entered a state of emergency, and the attention of domestic agricultural products has increased. Experts have monitored that if not contained, desert locusts could reach 500 times in June, far more than the current 360 billion. Pakistan has a high probability of locust spread and outbreak, which may cause a 30%-50% reduction in grain production. India has suffered 5.55 million mu of farmland. Today, the futures price of farm products in China is generally rising, some of them are strong, and the factors of capital speculation account for more. According to the Xinjiang area, no such locust is found at this stage. In addition, the low temperature in Xinjiang, and the migration conditions of desert locust and adult are about 40 ℃. At the same time, China's locust monitoring and early warning and control capabilities continue to improve, the level of control technology is the world's leading level, the locust control equipment reserves are sufficient, and the risk of large-scale locust outbreak in China is very low.

On the other hand, the sampling survey of the national cotton market monitoring system shows that as of the beginning of February, the average stock use days of cotton in the enterprises under sampling survey are about 54.1 days (including the quantity of imported cotton reaching port), an increase of 22.2 days on a month on month basis, a year-on-year increase of 9.5 days. It is estimated that the National Cotton Industrial inventory is about 1.125 million tons, an increase of 69.6% month on month and 14.1% year on year. The purchase of raw materials is more wait-and-see, and the willingness of stable cotton distribution is strong; the enterprise's capital turnover and labor situation become worse; the production and sales rate of yarn and cloth has declined greatly, and the inventory has increased substantially.

In 2020, cotton production in the United States is expected to reduce. Although the domestic conditions for resumption of work are gradually improving, the overall operating rate of the short-term cotton market is certainly not as good as that in previous years. In addition, with the increase of cotton inventory, the capital turnover is difficult, and the decline in production and sales is prominent. SunSirs analysts believe that spot prices remain stable, Zhengzhou cotton forward operating space slightly larger.

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