USDA Acreage report issued Sino-US top-level meeting releases good news

Two events at the last weekend happened to influence the cotton prices. One was the top-level meeting between Chinese President Xi Jinping and U.S. President Donald Trump for much anticipated talks on the future of China-U.S. relations and their trade frictions. Another was the yearly Acreage Report released by USDA. The two events boosted the market confidence somewhat, and gave some space for orders depressed by nearly two month’s downtrend. The Sino-US trade negotiation, in particular, was favorable for the Chinese consumption anticipation. The resistance for the price was to see the recovery of buying interests.

Top-level meeting releases good news
On Jun 29, Chinese President Xi Jinping and U.S. President Donald Trump had a meeting for much anticipated talks on the future of China-U.S. relations and their trade frictions, according to Xinhua News. The U.S. side said it will not add new tariffs on imports from China. The two countries' economic and trade negotiating teams will work on specific issues. Though the previous tariffs have not been cancelled and no confirmed agreement was seen, the news was still good for the industry. The extreme market situation in May and Jun caused by macro aspect has been eased and recovered somewhat.

Barring the recovery of macro aspect, feedstock inventory in weaving plants was at nearly 3 year or 4 year low level, and they continued to cut operating rate or turned to produce high-count products. For product inventory, spinning mills already have effects. Though yarn prices have been constantly decreasing, the decrement has slowed down gradually when Zhengzhou cotton futures market started to rebound. For fabric plants, fabric inventory kept accumulating though operating rate was cut. For the cotton textile industrial chain, with enormous plants and fierce competition, spinners and weavers mostly run with product inventory. With better anticipation and higher feedstock prices, speculative inventory or processing will increase, good for the upstream market.