The Role Of Cotton Futures In Marketing

"Look at it.

Those who say this are not farmers who grow cotton or agricultural experts, but Li Hui, general manager of Urumqi Business Department of Wanda futures.

The reason why he became a cotton expert was because 6 years ago, when China's cotton futures contract was listed, he was ordered to set up the Urumqi Sales Department of Wanda futures. The main function of the sales department is to develop cotton spot business customers and provide futures services for them.

Order + futures

"Cotton futures is an indispensable means of operation for us.

With the futures market, enterprises will have good helpers to achieve sound operation, which is very beneficial for enterprises to avoid risks and improve comprehensive benefits.

Li Hui is also concerned about how many layers of peach can be grown this year, and Li Deming, who is a large cotton farmer in Shawan County, Tacheng.

From Henan to Xinjiang, he rented 5000 acres of land, all of which were cotton.

"We used to have two fears in farming, even if the weather did not take care of it, and the harvest was not good; two, if the price changes fast, we could hardly make money."

But now Li Deming is not so worried about his "two fears".

In response to natural disasters, there are agricultural insurance and advanced planting technology.

"At the beginning of this year, under the heavy snow, cotton was planted nearly 10 days later than usual, but the price of cotton futures has risen this year.

The purchase price we have signed with the cotton processing plant is on the futures price. At this price, our income will not be bad.

Li Deming, who is becoming more and more fearless, is preparing to run a cotton cooperative with a few cotton farmers nearby to purchase seeds, fertilizers and pesticides to reduce production costs. When sales are done, a contract is signed between cotton processing plants and the cotton processing plant. The order price is also used to lock in price risk and achieve steady development.

Between Li Hui, who provides professional futures intermediary services and Li Deming who directly planted cotton, one can not skip. He is the general manager of Hu Hongwei, Shawan County Tian Ying Cotton Industry Co., Ltd.

It was his existence of cotton purchasing, processing and selling that brought this modern financial instrument to Li Deming.

Traditional cotton processing enterprises can earn a lot of money when prices rise, but when prices fall, they often lose years of accumulation. The development of Hu Hong's business is in 2008 and 2009.

During this period, there was an international financial crisis. After the crisis, the economic situation rebounded rapidly. Cotton prices also fluctuated like a roller coaster.

Under this background, Hu Hongwei can say that he can appreciate a lot of development, but in the final analysis, he still has to thank cotton futures.

"In October 2008, the international cotton price plummeted, but because we have fully guaranteed the early purchase of seed cotton, the futures sold the hedging to make a profit, to make up for our losses in the spot market; in 2009, the trend of the processing season was just the opposite; we made futures hedging at the price of about 16500 yuan per ton, until the spot sale began, we chose to open the stock in futures and sell it in spot."

Under the guidance of the price of futures market, Hu Hong's business scale is bigger and bigger.

"The price trend of these two years is definitely an enterprise marketing course. For a spot enterprise like ours, if we insist on not speculating, futures will surely make the development of enterprises more robust."

On the basis of groping for the first two years, Hu Wei tried to share the price information of futures market with partners on the chain of operation this year. He launched a pilot project of "futures + spot + order + loan + paction delivery" with local banks, rural credit cooperatives, cotton growers, Futures Company and many textile enterprises. His business mode fully utilized the price discovery and hedging function of cotton futures market, and made cotton futures run through the whole process of enterprise operation.

The role of cotton futures for Xinjiang cotton enterprises may be evaluated by Liang Dongya, general manager of cotton and hemp company of Xinjiang production and Construction Corps. "Cotton futures are indispensable for us.

With the futures market, enterprises will have good helpers to achieve sound operation, which is very beneficial for enterprises to avoid risks and improve comprehensive benefits.

Futures + cooperatives

When the large cotton farmers, processing factories, distributors, Futures Company and so on all pay attention to several layers of cotton bolls this year, the development of the whole industry chain has completely different weather.

Li Deming and Hu Hongwei first enjoy the benefits of futures. Hubei Yinfeng cotton Limited by Share Ltd, as the leader of using futures to serve the business, is also concerned about several layers of cotton bolls this year.

"Silver Feng has been able to gain a firm foothold in the fierce market competition and achieve development. In the final analysis, it has changed from the single spot operation in the past to the business model of order plus futures."

Under the efforts of Cai Yajun and his team, Yinfeng has been enriching the way and means of participating in the futures market, and the ability of enterprises to avoid risks is stronger and stronger.

In 2003 and 2004, the huge fluctuation of cotton prices made silver Feng lose tens of millions of dollars in cotton trade. "When we learned that in June 1, 2004, when Zheng merchants launched cotton futures, they immediately decided to invite cotton futures experts to carry out hedging knowledge training for middle-level cadres, and select excellent talents to go to the United States for study and inspection.

Starting in 2004, we began to participate in the futures market's hedging pactions and set up a futures department in 2005.

Cai Yajun, the vice-chairman of the company, said, "we acted early and harvested early."

Backed by futures market, Yinfeng's spot business scale is expanding.

Today, Yin Feng has led 33 cotton cooperatives in Hubei cotton area, with an area of 764 thousand mu.

Yinfeng's Cotton Cooperative not only provides farmers with improved varieties and training, but also provides farmers with a guaranteed price above the market price, and two rebates for cotton farmers.

Under this acquisition mode, the two sides agreed to purchase according to a certain futures price. If the latter price fell, the loss would be borne by Yinfeng.

The reason why companies dare to assume is that the hedging operation has been carried out at the time of acquisition.

If the latter price rises to a certain point, the two sides share the profits brought by price rise in a certain proportion.

This mode can not only enhance the comprehensive competitiveness of enterprises, stabilize the profits of enterprises, but also indirectly protect farmers' planting benefits.

According to Cai Yajun, in recent years, 33 cotton professional cooperatives have rebate 4 million 50 thousand yuan to cotton farmers, so that cotton farmers' income is maintained at around 6600 yuan.

The farmers' cooperative support measures to farmers and farmers really touched the cotton farmers. More and more cotton farmers voluntarily joined the Yinfeng Cotton Cooperative in the radiation range of the Yinfeng acquisition base, so that they could cotton and grow cotton well. They were more willing to sign the purchase order with the cooperative society and hand over the cotton to the cooperative society, and Yinfeng also went beyond the traditional "buy and sell" cotton business, from the former "cotton trader" to the modern cotton merchant who flexibly applied derivatives.

China's cotton production accounts for about 30% of world output and consumption accounts for about 40%. It is the largest cotton producer and consumer in the world.

There are about 40000000 cotton farmers in China, involving 140 million people and about 20000000 employees in textile enterprises.

If China's cotton industry chain is only Li Deming, Hu Wei Hong and Cai Yajun, then the industrial chain is still far away from modern management. The accession of Li Hui has enabled this traditional industry to have the support of modern financial instruments.

When Li Deming, Hu Wei Hong, Cai Yajun and Li Hui pay attention to several layers of cotton bolls this year, the development of the whole industry chain has completely different weather.

"Cotton futures have been launched for 6 years, and the role of service entity industry development is gradually being played. More and more agricultural enterprises are actively using futures market hedging, and the majority of cotton farmers begin to rely on futures price signals to arrange production. Especially since the outbreak of the international financial crisis in 2008, many enterprises have made effective use of cotton futures, avoiding the adverse effects of large fluctuations in cotton prices on production and operation, and achieving a sound operation."

Zhu Zhixin, deputy director of the national development and Reform Commission, commented on the functions of cotton futures.