Zheng Cotton's Rally Is Not Over Yet.

Zheng cotton's main contract started from 16380 yuan per ton, in 3 months, all the way to the highest point 24280 yuan / ton, or 48%, and there was little adjustment in the middle. At present, the signal of the end of the current bull market of cotton is still absent, and the possibility of a new high is very large.

Spot driven futures, Zheng cotton rally has not ended

　　 cotton Prices are rising steadily, still in the bull market. An important feature of the current bull market is that spot prices are leading the rising price of futures, which is essentially different from the price bubbles generated by speculative futures. It is precisely because of this reason that the current round of cotton prices continued to rise, a slight drop in intraday, that is, a new high.

China's and global cotton production dropped sharply in 2009/2010, and after July and August, textile enterprises were "on the rack". In this connection, a 600 thousand ton reserve plan was launched (400 thousand tons later). The buyers of cotton reserves are limited to textile enterprises with actual demand. Therefore, the selling price of reserve cotton has become an important guideline for spot and futures markets and even the purchase price of new cotton.

Since August 10th, it has been put into operation in October 11th. Reserve cotton About 30 thousand tons per workday, and a total of 770 thousand tons were put into the market. According to the net weight of the 328 grade cotton, the transaction price rose from 18000 yuan / ton to 11 yuan 24415 yuan per ton, and the probability of high transaction price in the future is still very large.

The high price is caused by the expansion of the gap between production and demand. According to the investigation by the agriculture department, the national cotton planting area About 74 million acres, unchanged from the same period last year. However, this year's overall growth is worse than usual, and the market is late. The total output is expected to decrease over the previous 6 million 400 thousand tons. In 2009, domestic demand for cotton was about 10 million 600 thousand tons, and the gap between production and demand was 3 million 600 thousand tons, an increase of 2 million 600 thousand tons over 2008. According to the author's investigation, because of the surge in cotton yarn prices this year, the textile enterprises have been operating at the best level in nearly ten years, and have expanded their production capacity. According to conservative estimates, the demand for cotton in the new year will increase by 10%, and the gap between production and demand will at least increase by 1 million tons.

According to the global cotton supply and demand report released by the US Department of agriculture in October, China's cotton output in 2010/2011 is only 6 million 858 thousand tons, which is 218 thousand tons lower than that predicted in September. Global cotton production is expected to reach 25 million 404 thousand tons, a decrease of 60 thousand tons. China's end inventory and global end stocks are expected to continue to decrease, respectively, at 3 million 205 thousand tons and 9 million 724 thousand tons, far below the 4 million 198 thousand tons in 2009/2010 and below 4 million 4 thousand tons in 2004/2005. Global consumption is expected to be 26 million 294 thousand tonnes in 2010/2011, which is basically the same as last month's forecast. Generally speaking, inventory consumption has a greater impact on cotton prices. According to the report, the inventory consumption ratio of China and the world in 2010/2011 is 29.41% and 36.98% respectively, significantly lower than that of 37.2% and 39.66% in the previous year. In 2006/2007, the two figures were 41.03% and 50.17% respectively.

The bull market will come to an end. When will the inflection point occur?

There may be three important periods of adjustment and inflection point in the future, namely, the end of October this year, the end of December and April of next year. This year, the adjustment range of Zheng cotton is generally limited, and the main contract is less than 22000 yuan / ton.

The current contradiction between supply and demand of cotton is both short-term and long-term. The short term is because the reduction in production has resulted in the low inventory of cotton at the beginning of this year. According to the US Department of agriculture, China's initial cotton inventories in the new year are only 3 million 973 thousand tons, a decrease of 900 thousand tons compared with the previous year. For the national reserves, only 300 thousand tons or so remain at the limit level. It is imperative to buy and store the cotton prices in the future.

In addition, from July this year, the old cotton has been used up in 2009, and the new cotton has not been listed in 2010. Due to weather factors, the harvest period has been postponed for at least 10 days.

A cotton importing enterprise in Shanghai reflects that there is no cotton in hand now, and the newly harvested cotton and cotton will be shipped to China, and the earliest will be until the end of December. The latest policy of India, another big cotton producing country, has been allowed to export since November 1st, with the maximum export volume of 930 thousand tons, and it will almost arrive in mid December when shipped to China. Due to the impact of this year's floods, Pakistan's cotton production has been greatly reduced, and a large amount of imported cotton is needed to meet the textile needs.

The new cotton that can be relied on only now after the end of October will be listed in large quantities. Considering the relatively low quality of cotton in the mainland, the focus of textile enterprises' purchase will still be Xinjiang cotton. According to previous research, Xinjiang cotton production decreased year by year. The main reason is that the cotton planting area of the autonomous region and the regiment will only decrease and not increase. In the future, Xinjiang will gradually increase its planting area with high economic value and gradually reduce the cotton planting area with relatively low economic value. The ecological protection plan of "returning farmland to forests" has also been put into effect. The agricultural and animal husbandry land in the whole Xinjiang area will gradually decrease. In some areas that are not suitable for cotton cultivation and low yield, the cotton standard is probably less than 500 Jin per mu per square meter, and cotton planting will be phased out in the future.

The contradiction between supply and demand of cotton is also longer-term. With the continued stimulation of loose monetary policy at home and abroad, in addition to steady growth in production demand, new demand will also emerge in speculative sectors as prices rise.

On the supply side, China is the largest cotton producer and has a decisive impact on global cotton production. From now on, the planting area of cotton is decreasing year by year, and the trend of output declining year by year is difficult to change. In China, cotton is identified as an economic crop. Under the premise of ensuring the safety of grain strategy, it is very difficult to stabilize the cotton planting area. The modernization of cotton cultivation in the United States is very high. As long as cotton prices remain at the present high level, next year, the cotton planting area in the United States will continue to increase. The annual yield per unit area of cotton in India is relatively low, and there will be more room for further growth in the future. However, its export policy generally presents a restrictive tendency, which is temporarily unable to play a role in easing the contradiction between supply and demand of global cotton.

That is to say, by 4 and May next year, with the spring sowing of cotton at home and abroad, cotton planting area and new annual output are expected to increase significantly, and Xinjiang cotton will enter the mainland in large numbers, which will bring substantial pressure on the high cotton prices, and the cotton price will fall to about 19000 yuan per ton. But from a longer period of time, cotton prices will remain high for a long time so long as China does not introduce new cotton subsidy policies, India does not change its policy of restricting exports and there will be no major problems in the global economy. The price range of domestic cotton will probably increase from 13000 yuan to 18000 yuan per ton in the past to 18000 yuan / ton to 28000 yuan / ton in the future, and the price range of cotton and cotton will increase from 40 to 80 cents in the past to run 60 to 120 cents in the future.

At present, the prices of cotton, cotton yarn, grey cloth and cloth are rising continuously, and the wholesalers at the downstream terminal have suspended the purchase again. The previous two suspension of purchase occurred at the time when the main cotton futures price reached 19000 yuan / ton, which occurred during the Mid Autumn Festival, when futures prices exceeded 22000 yuan / ton. Then, as prices continued to rise, downstream buyers could only repurchase.

On the operation, we pay close attention to the technical graphics of cotton futures. As long as there is no obvious single day reversal pattern, every adjustment of cotton price will be temporary and the probability of re rising will be great. If there is a reversal pattern, we should pay enough attention to it and the adjustment range may be larger.