Cotton Will Enter High Oscillation Pattern

7 since the end of the month, ICE cotton is in strong demand.

Tight supply and demand supports high cotton prices

From this year

In the September cotton outlook report, USDA continued to reduce the end of the global cotton inventory.

After 4 consecutive years of decline in global cotton inventories, the end of 2010/2011 cotton inventory is expected to be 9 million 894 thousand tons, the lowest level in 14 years, and the global inventory consumption ratio of 38%, the lowest level in nearly 15 years.

From the domestic point of view, China's cotton end inventory in 2010/2011 is expected to be 3 million 486 thousand tons, the lowest level in 16 years.

This year, China has thrown 4 reserves to ease the tension in supply of cotton, and its reserves have reached 2 million 100 thousand tons. The shortage of state reserve cotton has prompted the demand for replenishment of national cotton reserves.

In addition, the demand for domestic and foreign sales of downstream cotton enterprises in China will continue to reach the new year.

After the financial crisis, the world is in an economic recovery stage, but the foundation for recovery is still relatively weak. The IMF forecasts that global economic growth this year will be 4.6% and 4.2% in 2011.

In view of this, countries will continue to maintain a relaxed policy. Some countries will even increase their support for the economy, thereby driving the expansion of consumer demand.

The USDA forecast also shows this trend: the global consumption in the new year has increased by 3.7% to 26 million 243 thousand tons compared with 2009, and China's consumption has risen 5.2% to 10 million 886 thousand tons over the 2009 year.

Dust settled in India's cotton export policy

India is the second largest cotton producer in the world and a major exporter of cotton. Therefore, the change of India's cotton export policy is crucial to the global cotton supply.

According to USDA forecast, China's supply and demand gap reached 3 million 800 thousand tons in 2010/2011, of which 73% depended on imports. In recent years, domestic cotton enterprises were more favored by imported cotton because of the reduction of high-grade cotton in China.

The United States and India are the two major importers of our country. In 2009, India surpassed the United States to become the largest cotton importer in China. However, due to several adjustments in India's export policy, the market's concern for the 2010 cotton export policy in India increased.

It has been reported before that India textile Ministry urged cotton textile exports to be postponed to January next year, and this has also become a combustion improver for soaring cotton and Zhengzhou cotton.

At present, India's export policy has fallen to dust. India will allow exports of cotton from November 1st, and cotton suppliers can sign export contracts from October 1st. The maximum export volume is 5 million 500 thousand packages, with a weight of 170 kilos per pack.

Whether RMB appreciation or not will pressure textile enterprises.

Since the announcement of China's reform in June this year, the central parity of the RMB against the US dollar has continued to rise, especially in recent years.

As of October 8th, the central parity of RMB against the US dollar was 6.6830, which was 181 basis points higher than the previous trading day, and it has hit a new high since the reform. It has appreciated 1.7% in a short period of time.

As we all know, RMB appreciation will have a certain negative impact on China's exports, especially for textile enterprises whose profits are few. The appreciation of the renminbi will directly weaken the profits of textile enterprises.

Some professionals estimate that if the RMB appreciates 3% to 5%, China's small and medium textile industry will not make any profit.

Accompanied by the sharp appreciation of the renminbi, the United States has put pressure on the trend of the RMB. The house of representatives of the United States has voted to adopt a bill against China's RMB exchange rate, that is, a special tariff act is imposed on the so-called undervalued exchange rate. Therefore, the appreciation of the renminbi will pressure China's export oriented enterprises.

According to customs statistics, from 2010 to July, China's textile and clothing exports to the United States accounted for 16.85% of the total export volume of China's textile products. If the RMB did not appreciate significantly, the United States would levy countervailing duty on China's export commodities, so the Levy of countervailing duty on textile enterprises would indirectly crush the profits of enterprises.

Policy influence or short-term uncertainty

The sustained and rapid rise in cotton prices has attracted the attention of the state. The national cotton working teleconference has determined that 5 measures will be taken to ensure cotton supply and support cotton production.

Subsequently, the state decided to continue to put 400 thousand tons of State Cotton on the basis of the premise of putting 600 thousand tons of State Cotton on the premise, and announced the 2011 cotton import quota of 894 thousand tons.

The state's regulation and control measures are obviously not limited to this. In the face of high cotton prices, other means of regulation may still exist.

From the perspective of throwing storage, the price of throwing and storage has cooled down. In September 28th, the country continued to increase 400 thousand tons. The average price of cotton reserves was 21514 yuan / ton on that day, which was 262 yuan / ton lower than 27 days, and the average price of 29 days fell to 18867 yuan / ton, and the average price of 30 days was 19038 yuan / ton.

Judging from the spot price of cotton, although cotton prices are still rising, but the increase is smaller than the previous period.

According to the spot industry estimates, the new cotton market will be expected to appear on a large scale before October 15th, and the situation of tight supply and demand will be improved. This wave will be effectively buffered by the tight supply and demand side, and Zheng cotton will gradually enter the high oscillation pattern.