Cotton Is Difficult To Rise And The Economy Is Worrying.

The trend of cotton market at home and abroad is not the same recently. Zheng cotton index has been rising since mid November 2008. Up to now, it has lasted for a year and a half. Cotton prices have been innovating repeatedly and there has been a situation of unmanageable trend. Since the beginning of 2010 March, the US cotton has started to consolidate at high level. Although the December contract has started to rise in the near future, it is mainly correcting the low price in the early stage.

First, the international economic outlook is worrying.

At present, the European sovereign debt crisis is still spreading, and whether the euro's rebound is sustainable is worth looking forward to. It is rumoured that the European Union, IMF and the US Treasury are drafting a liquidity assistance plan for Spain, but then the Spanish government denied the aid arrangement, which provided support for the short-term strength of the euro. But the euro zone's problems are more than that.

The imbalance of economic development will lead to big problems in the rescue plan. Whether the sovereign debt crisis will spread to the banking system and then affect private sector financing is also worth noting. The dislocation of monetary policy and fiscal policy will further adversely affect the effectiveness of the rescue plan. Whether the euro zone should be worried about partial deflation is also a matter for investors to consider.

It can be seen that at present, the risk of the "two bottom finding" of the global economy is still intact. It is difficult for the commodity market to stage a unilateral rise.

Two, global cotton supply and demand pattern

According to the cotton supply and demand report released by the US Department of agriculture in June, cotton production in China and the United States was 33 million packs (about 7 million 200 thousand tons) and 16 million 700 thousand packages in 2010/2011, respectively, which did not increase as reported in May. But China cotton information network production survey in May showed that in 2010, China's cotton planting area was 78 million 860 thousand mu, with a total output of 7 million 110 thousand tons, representing an increase of 1% and 3% in 2009 compared with 2009. The tight global cotton supply pattern is expected to improve substantially in the new year.

At present, the next hot spot of market concern is the annual planting report released by the US Department of agriculture in June 30th, which will indicate the direction of 2010/2011 cotton production in the United States.

Three, China's cotton supply and demand pattern

According to the survey of China cotton information network, in May, the average cotton inventory in China increased from 38.13 days last month to 41.21 days, and the cotton industrial inventory was increased from 1 million 209 thousand tons to 1 million 305 thousand and 700 tons. The larger cotton stocks in the general enterprises were more than 3 months old. Therefore, before new cotton comes into the market, this year's cotton can basically meet the downstream demand. The rapid uplink of cotton price and yarn price in the early stage brings about the continuous accumulation of inventory, especially the large stock of yarn, which will be consumed in the next few months. By the end of May 2010, the total volume of domestic cotton business inventories was 2 million 460 thousand tons. From the perspective of supply and demand, high-grade flowers were in short supply due to scarcity. In addition, if the recent national dumping, it will become a trigger factor for the fall in cotton prices.

At present, the rise of new cotton is relatively good. The rotation of temperature and weather in May has made cotton growth in all major producing areas tend to be normal, both high and true leaves are excellent. However, in May, most cotton areas in China were in seedling stage, and the true leaves were generally in 3 - 4 slices. Under the influence of weather and seeding time, cotton seedlings developed late, and cotton growth progress was delayed compared with previous years.

The sharp increase in cotton planting area and estimated output in 2010/2011 will greatly ease the tight supply and demand situation of cotton in China. However, the uncertainty of future cotton yield will affect the trend of the future market. According to the normal output of 7 million 100 thousand to 7 million 200 thousand tons in previous years, the fluctuation of output will be great once the fluctuation of per unit yield occurs. Assuming that there is a standard deviation per unit area yield, the highest yield can reach 7 million 800 thousand tons, and the lowest may be 6 million 600 thousand tons. However, as far as the current situation is concerned, cotton production is expected to exceed the normal level this year as long as the weather does not show great abnormality.

China's cotton supply and demand balance sheet

Judging from the export situation of textile and clothing, according to the statistics of China Customs, the export growth rate of textile and clothing in May was faster than that in the early stage, and the export of textile yarn, textile products and products was 28 billion 560 million US dollars, an increase of 29.7%. Although the performance of the data in May is very strong, the follow-up efforts are doubtful, because the economic situation in the European Union will largely affect the export prospects of China's textile and clothing industry. As export data reflect the lag of the European economy, the volume of subsequent exports will fall. At the same time, the growth of exports will also increase the pressure of RMB appreciation.

Four. Post market judgement and operation

Based on the above analysis, I believe that cotton prices are relatively high at present, and the driving force to continue upward is insufficient, especially the price of new cotton after the CF1101 contract is likely to fall sharply. On the operation, the author recommends that more than one single take advantage of the rebound to choose to leave the field. The CF1101 contract can be considered short selling at more than 16800.

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