Zheng Cotton Market Adjustment Space Limited

Insiders believe that although Zheng cotton Phased adjustment is inevitable, but commodity market liquidity and the depreciation of the dollar, the CRB index is still high kinetic energy, and the domestic cotton market in January next year, the supply and demand situation is difficult to effectively alleviate, so the cotton market adjustment space is limited.

Futures daily October 21st news, the interest rate increased by the impact of the introduction, in October 20th, Zheng cotton early opened sharply lower, but then rose sharply, intraday hit a new high since the listing, long-term contracts did not synchronize. We believe that cotton futures have experienced a sharp rise in the previous period, and the main force's profit appetite will be enhanced. Phased adjustment is inevitable. But considering the ample liquidity of the commodity market and the depreciation of the US dollar, the CRB index still has a high kinetic energy, and the domestic cotton market is hard to alleviate effectively before January next year. Therefore, the adjustment space of the cotton market in the future is limited.

The quantitative easing policy in the international market remains unchanged. Domestic interest rate increase Short term bad profits are long-term benefits.

The continued depreciation of the US dollar has led to a revaluation of the value of resource goods. Cotton, which has not risen sharply in recent years, has been favored by speculative funds in the global inventory consumption ratio of 17 years low and the major reduction in cotton production in major consumer countries this year. In just a month or so, ICE cotton rose more than 30%, and this year it has risen more than 60%. Despite nearly two trading days down, we believe that as long as the currency is not changing, the US dollar will still hit a new low, while the commodity market will remain strong and cotton futures prices will rise and fall.

19, the central bank unexpectedly raised interest rates for the first time in nearly three years. We believe that the central bank's interest rate increase means not only to curb inflation but to control CPI effectively, and to tighten liquidity, and to a certain extent, to ease international pressure on China's RMB appreciation through interest rate liberalization. Of course, the increase in interest rates and low interest rates in the international market will encourage some foreign capital to flow into arbitrage. Therefore, we believe that this increase in interest rates is short term and long term for the commodity market, and the early increase is too large. After the technical adjustment has been carried out, the cotton, oil and grain markets are still mainly driven by oscillations.

Consumption growth is not decreasing, but High cotton price Curb market purchases and demand.

1. under adverse weather conditions, the new cotton production has been greatly reduced, and the purchasing price of new cotton is high.

During the seed cotton listing this year, the the Yellow River cotton basin in Hebei Province, Shandong Province and Henan Province, which were the main cotton producing areas in China, were affected by the continuous rainy weather. With the delay of spring sowing for nearly a month this year, the quality and output of cotton in this season were all adversely affected. It is estimated that cotton output in China will be roughly 6 million 640 thousand tons this year, basically unchanged from last year.

Judging from the purchase price, the price of seed cotton has exceeded 11 yuan / kg in most parts of the country. According to the average 38 lint percentage and moisture content within 15, and cotton meal 1700 yuan / ton, the processing cost of cotton ginning is over 23500. In fact, the cotton seed purchased in many areas can only be processed to below four flowers, while the normal moisture content is about 18. Most enterprises are afraid of processing and stockpiling goods. The increase in acquisition and processing costs of new cotton makes the spot price remain high.

Because the quality grade of new cotton is generally below four grade, for textile enterprises, free inventory plus national dumping, high-grade cotton can only meet the consumption business until the end of November. At this time, a large number of imported cotton and India cotton are difficult to enter the market, so the stage of supply and demand tension will continue. Domestic cotton spot market and futures contracts will remain strong or hit a new high.

2., global consumption is heating up, China's consumption is booming, and large quantities of imports are driving up international cotton prices.

The continuous recovery of the global economy has promoted the growth of cotton consumption, while cotton consumption in China is expected to exceed 10 million 500 thousand tons this year. Due to the two consecutive years of reduction in production, China has to import large quantities from the international market. In 2010, the total amount of import quotas issued by our country amounted to 3 million 562 thousand tons, while cotton imports in 2010/2011 were expected to be 2 million 800 thousand tons. Even so, according to the report released by USDA this month, the final inventory of 2010/2011 in China has been adjusted to 2 million 142 thousand tons, and the inventory consumption ratio has dropped to 21%.

Affected by this, the international market ICE cotton prices effectively break through 100 cents / pound mark, the first target will challenge 120 cents. Because of the large number of imports from China, the United States cotton has been constantly moving cattle, thus driving the domestic spot market to go higher. The rising Chinese cotton market has become the theme of international speculative capital speculation "China demand", which has further pushed up the price of international futures cotton and directly led to the increase of cotton import cost in China.

3. the prosperity of the textile industry has improved, and the output of China's yarn has been growing gratifying, but the high cotton price has inhibited the demand of textile enterprises.

According to the data released by the National Bureau of statistics, in September this year, China's spinning output reached 2 million 438 thousand tons, an increase of 298 thousand tons compared with the same period last year, an increase of 13.9%. In 2010 1 - September, China's yarn production totaled 19 million 975 thousand tons, an increase of 2 million 770 thousand tons compared with the same period last year, an increase of 16.1%.

Due to the recent rise in cotton prices and the relatively small increase in yarn prices, textile mills (cotton mills) are now under great pressure to purchase. It is understood that cloth factory has begun to limit production, stop production, regret the single phenomenon, high cotton prices to a certain extent, inhibit the effective demand of the market.

The state has stepped up the regulation of the cotton market and formed a high level of technology.

1. the loan policy of the Agricultural Development Bank this year will help to curb speculative rush to harvest seed cotton.

Because a large number of cotton purchasing processing enterprises need to borrow money from the Agricultural Development Bank, and in order to control risks, the agricultural development bank will calculate the standard cotton loan risk control line according to the cotton price index for a certain period. According to the previous period, the calculation is roughly 18200 yuan / ton (910 yuan / Dan), and the seed cotton purchase price is 8.7 yuan / kg. This guidance price is substantially lower than the actual purchase price of the current market at least 11 yuan / kg. Therefore, many enterprises can not get cotton according to the guidance price. Therefore, in the context of excessive cotton prices, these loans can not be fully entered into the market, which can objectively curb the soaring cotton prices and reduce speculative speculation of seed cotton.

2., in the face of CPI high prices and the sharp rise in agricultural products prices, the state has stepped up regulation and control efforts.

As the market predicts that CPI will reach about 4% in September, the sharp rise in agricultural products since August this year has increased the inflation expectations of the market, while the pressure of the slowdown in the second half of this year has increased. Therefore, the state has intensified the regulation and control of agricultural and sideline products, such as in the oil market, 300 thousand tons of rapeseed oil has been thrown away in the near future. We believe that if cotton prices continue to rise sharply, the country will also introduce more regulatory policies, such as further increasing the number of national cotton auction and increasing import quotas.

To sum up, we believe that the cotton market will continue to appear easy to rise and fall. The main contract CF1105 will fluctuate in the 22600 to 25000 region.