The novel coronavirus pneumonia has been gradually eased under effective domestic control measures, according to the futures daily February 27th. However, the epidemic has escalated in some countries around the world, and the market has been rekindled. The trend of cotton price depends on the control of the epidemic situation and will remain weak for a period of time.

The outbreak of novel coronavirus pneumonia began in December 2019, and the state made strict measures in time to prevent and control it. According to the data released so far, the epidemic has been effectively controlled and the number of newly confirmed cases continues to decrease. However, it is not clear when the prevention and control measures can be completely lifted. At present, the main impact of the epidemic has two aspects: first, the end of textile and clothing consumption has lost a major period of consumption; second, the downstream production end has been delayed.

According to the breakdown data of textile and clothing in previous years, the proportion of consumption from January to February in the whole year is 17.3%, which is slightly higher than the average in monthly average, and has a downward trend in recent years. If the epidemic can be controlled by the end of February, even considering that people's consumption confidence will continue to be affected in March, the overall domestic demand consumption is expected to reduce to about 500,000 tons of cotton consumption. If the epidemic happens repeatedly, the consumption will decrease or reach 30% of the annual domestic consumption, nearly losing the whole consumption of spring and summer clothing.

In terms of commencement, the impact is relatively small. According to historical data, the output value of textile industry from January to February accounts for only 3.5% of the whole year, which is very small. At present, the enterprise gradually returns to work, and the overall return to work is about 2 weeks later than the normal situation. Of course, even if we return to work now, the need for epidemic prevention and control will also affect production capacity. But on the whole, the impact on the production situation is relatively limited, and the negative impact can be partially offset by the later scheduling.

Epidemic spread abroad

Recently, the epidemic continued to ferment abroad, with South Korea, Japan, Singapore, Iran and Italy the most serious. At present, as many as 1,146 patients have been confirmed in South Korea, an increase of nearly 200 people a day, which has caused panic. Italy has 323 confirmed cases, making it the most serious country in Europe. At present, the above countries have taken strict control measures to try to control the spread of the epidemic. According to this, Paul Greenwald, chief economist of S&P global rating, cut global economic growth by 0.3 percentage points this year and China's annual economic growth by 0.7 percentage points to 5.0%. The impact of the epidemic on the economy will be mainly reflected in the first quarter, which will have a significant negative impact on global cotton demand.

Adjust the balance sheet of supply and demand

At the beginning of this year, the author analyzed the total domestic consumption of 8.3 million tons, and concluded that the inventory at the end of this year will be the lowest in recent years, and the cotton price is expected to rise steadily. However, after the outbreak, domestic consumption is expected to be reduced by about 500,000 tons under neutral expectation, ending inventory will return to the scale of 2017/2018, and the upside space of cotton price is expected to move down. The global spread of the epidemic will increase the reduction of domestic consumption, which is expected to expand to about 1 million tons, and the ending inventory will reach a record high. However, in terms of the price difference between domestic and foreign cotton, the production cost of cotton farmers, and the price comparison between cotton and other crops, cotton is also at the stage of undervalued, with limited downward space.

The key of cotton price trend in the later period is the control of global epidemic situation. At present, the domestic epidemic prevention and control battle is well underway, but the demand will be seriously affected due to the high risk abroad. For novel coronavirus pneumonia, cotton prices will remain weak for some time and wait for the global people to fight against the epidemic.

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