Xinjiang Farmers And New York Futures Exchange: Cotton Tango

The high society had a fantastic dream.

The ordinary cotton grower in Akesu, Xinjiang, spent the first half of the year in a nightmare: he planted 100 mu of cotton first in heavy snow and then hail, and only more than 100 kilograms per mu were harvested, less than 1/3 in previous years.

The high society regretted that the intestines were green and intended to replant wheat next year.

However, in a few months, the sky dropped "gold". When the cotton came out, someone got 10 yuan and a kilogram to collect it. Now it has risen to thirteen four blocks.

You know, last year's purchase price was more than 6 yuan.

"It's said that they are all futures. I've seen it on TV news, but I don't know much about it."

The high society, which has sold cotton, said with satisfaction.

He had no way to know how unfamiliar things of futures cotton farmers stirred the cotton in the field, and how did the New York futures exchange far beyond the mountains and rivers drag him into a "cotton tango" with irresistible force?

Butterfly wings in the US

In August 12th,

In August, when the cotton in the high society just started picking up, a futures research team of more than 30 people was in the field of Akesu to inquire about the output and price of cotton this year.

These legendary "Zhejiang futures big household" immediately came out the news, this year cotton's first target price is 20 thousand yuan / ton.

However, futures traders are not crazy.

Many local cotton companies do not know that the butterfly of the US Department of agriculture has flapped its wings on the New York futures exchange across the ocean.

In August 12th, the US Department of Agriculture announced that the supply and demand forecast for cotton in August showed that the inventory of cotton at the end of the year 2010/11 was reduced to 45 million 610 thousand bales (1 packs of 500 pounds) and the consumption increased from 119 million 700 thousand packages to 120 million 870 thousand packs.

The news was like a launch gun, and the market fund quickly flocked to cotton futures. On the same day, it bought 12000 hand bullish contracts, pushing the price of cotton futures in December to 85.71 cents per pound. The last time this price appeared was in 2008 April, the eve of the financial turmoil.

At this point, some market funds have been lingering in cotton futures for several months.

Some researchers noted that from the middle of 2009, the US cotton futures index, which was like death, suddenly became active.

In this market where information and capital are interconnected, China's cotton industry is only half a step slower than the US.

In late August, a series of "Zhejiang business department" Futures Company Qi Qi appeared in the "multi head list" of cotton futures, such as "Di futures", "new lake futures" and "Yongan futures".

The cotton futures trading volume of the Zhengzhou futures exchange soared from tens of thousands of hands at the end of July to nearly 3 million hands in mid October.

In just two months, the cotton futures price of the Zhengzhou futures exchange soared to no more than 17000 yuan / ton to nearly 34000 yuan / ton.

The sharp rise of the futures market and the rapid increase of the spot market price are regarded as the peak of the market. In November 8th, in order to cope with the sharp rise in futures prices, the textile giant Wei Qiao textile increased the spot purchase price of cotton substantially, raising the price by 2000 yuan per ton.

The continuous rise has been passed to the cotton field.

Over the past few months, the purchase price of seed cotton has been more than doubled, reaching an unprecedented peak of five or six yuan per catty, while cotton growers and high society have been dragged into a dizzying "wealth Tour".

Who saw the gold in the gap between supply and demand?

Huang Hongjun, currently an investment analyst at Jin Rui futures, was working as a trader for a large futures trader in Zhejiang. He discovered from the end of 2008 that Zheng cotton futures had gone out of a W bottoming trend. "Since then, I have been concerned about the gap between supply and demand of cotton."

The forecast data of US cotton supply and demand can create a "capital storm" on the market, and the forecast data of cotton supply and demand in China make the publishers very depressed.

According to a survey conducted by the Rural Economic Research Institute of the Ministry of agriculture, there have been two sharp decline in cotton farmers' income during the period from 2001 to 2009. One was in 2004, because the support policy was tilting to cereals such as wheat, rice and corn, and the income of cotton growers decreased year by year, which led to a 11% decline in cotton planting area next year.

The other is the market downturn at the end of 2008. In November, the lowest price of Zheng cotton futures was 11805 yuan / ton, and the purchase price of "3 yuan and more than one kilogram" was still in the memory of the high society. The cotton grower's cotton yield decreased by more than 60% over the previous year.

This huge contrast directly led to the reduction of cotton planting area by 375 thousand hectares in 2009 and the reduction of 525 thousand tons in Xinjiang.

Meanwhile, according to statistics from the cotton association of China Cotton Association, the cotton field area in the the Yellow River River Basin decreased by 16% in 2009, and the cotton field area in the Yangtze River Basin was reduced by 20%.

However, Wang Dingwei, Secretary General of the cotton growers branch, was disappointed that after the release of the survey data, "little attention has been paid to".

China's agricultural production has remained for a long time and depends on Farmers' sense of farming. Cotton farmers have not paid attention to these supply and demand survey data.

But the development of the financial market has brought unprecedented wealth to agriculture. The futures traders have already begun to catch this gap.

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Huang Hongjun, currently an investment analyst at Jin Rui futures, was working as a trader for a large futures trader in Zhejiang. He discovered that the trend of W bottomed out from the end of 2008. "Since then, I have been concerned about the gap between supply and demand of cotton". He said that in November 2009, the cotton supply and demand data released by the US Department of agriculture finally confirmed his speculation: the US cotton supply and demand gap reached 27.15% in 09/10, and China's supply and demand balance also reached 22.25%.

"It has never been seen in history. The difference between the previous points has been very large."

Huang Hongjun told reporters that the United States and China as the largest exporter and consumer of cotton, such a huge gap between supply and demand will inevitably drive up global prices.

Futures traders, who are much more sensitive than cotton farmers, have rushed out.

Futures, spot, fuzzy boundaries

When the US started firing, the two futures and spot markets seemed to be leveled off at once.

Earlier than futures traders in the futures market, the last buyers of cotton, downstream enterprises, began to launch early in the spot market as early as 2009 when new cotton was listed.

The news began to be laughed at in the local cotton enterprises. In the past, Xinjiang's cotton procurement never exceeded the "sky high price" of 17 thousand yuan per ton. Those big mouth owners who had closed 20 thousand yuan really thought that cotton was made of gold.

Jun Liang, Asset Management Co CEO Wu Junliang told reporters that in the first quarter of 2010, they noted that textile giants like Lu Tai invested heavily in the acquisition of cotton. "This is a rare phenomenon."

The acquisition of spot cotton by Lu Tai is evident from its income in cotton management.

In 2008, the revenue of Lu Tai's cotton business was about 30000000 yuan, more than doubled to 72 million yuan in 2009, and only 78 million yuan in half a year in the middle of 2010.

In the first half of 2010, it was common for large textile enterprises to continuously sell in the spot market.

Anhui Huafu color spinning Co., Ltd. at the beginning of 2010, the book value of raw materials was only 421 million yuan, but at the end of 6, it increased to 828 million yuan.

By the end of September, Huafu color spinning had added 120 million yuan in short-term loans and raised 375 million yuan to buy seed cotton.

Such a move was initially due to concerns about the rise in cotton prices and the advancement of raw materials.

Another reason is that money is abundant - large cotton enterprises can easily get funds.

In 2009, the 3.33,0.00,0.00% industry increased its lending by more than 10 trillion, an increase of 33% over the previous year, 3 times the economic growth rate and a 2 trillion and 800 billion increase in the first quarter of 2010.

In China, where money is highly relaxed, ample funds can provide financial support for any subject matter.

Textile giants are hoarding cotton stocks to increase their inventories.

China Cotton Association August industry Description: "large and medium-sized enterprises are very stocking at present, and some large textile enterprises have 6 months of cotton consumption."

In the past two years, their inventories were even less than a month's consumption.

Although hoarding and price rises in the spot market began long ago, the US led world cotton futures price has been "choking" until August.

The reason is not complicated: because the cotton trading year of the New York futures exchange is from August to July of next year, the liquidation will be forced at the end of July. If foreign futures investors significantly pull up the US cotton price before August, all the low price futures holders will sell at a high price in the year.

When the US started firing, the two futures and spot markets seemed to be leveled immediately. Hedge funds and traders with spot trading ability began to purchase cotton spot in large quantities, one step to enlarge the gap between supply and demand of cotton, to "protect" futures prices continued to rise; and the downstream textile processing enterprises with cotton as raw materials began to enter the futures market deeper, and the purchase contracts far exceeded the traditional hedging.

"We have recently been exposed to some enterprises, even if they do not need to produce large quantities of commodities such as finance and agricultural products (20.48,0.00,0.00%)," Huang Hongjun told reporters. Many enterprises have large bank credit lines every year. Under inflation expectations, some enterprises will "cash in" the originally used credit lines. With the sharp rise of corresponding futures prices, enterprises will gain much more than the main business itself.

Finale

By the end of October, the "big family", who had made a lot of money, started shipping quietly.

Such a futures market spot battle, the reporter interviewed a number of market researchers, the more crucial factor is still in the "monetary effect".

Xu Shimin, a senior securities firm, once inspected the soybean futures of the Dalian futures exchange, and introduced the resource allocation optimization function of futures to the agricultural product chain.

In an interview with reporters, he admitted that this round of agricultural products, including the rise in cotton futures prices, in a large sense, is "fried out".

"Friends in the US have told me that they are now making full use of various commodity futures indices while they are short of US dollars."

Xu Shimin said that in the situation of "the general trend of depreciation of the US dollar due to quantitative easing policy", the depreciation of the US dollar means the rise of all kinds of assets and commodity prices. The investment fund is shorting the US dollar at that time, and making more commodity futures can make a double profit in the two markets.

But everyone knows that the drumming of drums and flowers will stop.

By the end of October, the "big family", who had made a lot of money, started shipping quietly.

A large trader told reporters that they had all liquidated before October 25th: "earn too much and leave some for others".

In October 29th, the seven ministries and commissions of the national development and Reform Commission jointly issued urgent notifications, and announced in an unprecedented and severe manner that they should severely punish "malicious hoarding and bid up prices".

At this time, due to the support of the rise in the Chinese spot market, the price of Zheng cotton futures, which had fallen on the same day, fell more and more for two days, until November 10th.

In the past two days, a lot of hands and chips were reduced, which ensured the high profit of the bull and made the bears avoid the loss of the warehouse.

In November 15th, under the dual control of the policy of combating idle capital and raising the reserve requirement ratio of the central bank, the main contract of Zheng cotton futures fell sharply on the fourth day and the price returned to below 30 thousand. At the same time, the rebound in the US dollar exchange rate also led to a sharp fall in US commodity futures prices.

The cotton futures "crazy bull market", which lasted for 3 months, is coming to an end.

Many small and medium-sized enterprises are in a dilemma: they are accustomed to "zero inventory" at low cotton prices, and the processing enterprises lacking reserves can only stop production and leave.

But still excited by the high society, there is still no way to know whether the dance moves forward or backward when the tango tune is next year.