Phase Cotton Prices Trend Shocks, We Need To Be Cautious.

The recent fluctuation in cotton prices is amazing. It rose from 16940 in the early August to 33720 in the early November. In just 3 months, the price of cotton (26560, -625.00, -2.30%) nearly doubled 1 times, and the cotton price index in China also soared from 18229 yuan / ton to 31302 yuan / ton during the same period, up 71.7%.

The surge in cotton prices has been a strong support for Fundamentals and ample capital, and is also boosted by background factors such as the depreciation of the US dollar, the influx of global hot money into the capital market and the surge in domestic inflation expectations.

At present, when the policy vane is more inclined to adjust the commodity market to return to rationality, cotton prices will gradually return to reason, and the latter market needs more careful operation.

Policy control measures to stabilize commodity market

Due to excessive liquidity leading to rising inflation, the central bank resolutely raised the benchmark interest rate of RMB deposits and loans in financial institutions in late 10, and the benchmark interest rate for 1 years was raised by 0.25 percentage points simultaneously. This is the first time that interest rates have been raised in 3 years.

The series of macroeconomic indicators released by China's National Bureau of statistics in November showed that China's CPI grew by 4.4% in October, compared with 3.6% in September, which has reached a new high of 25 months.

It can be seen that the current data is clearly not optimistic relative to the target of CPI regulation in the country during the year. Therefore, the market is generally concerned that the central bank will probably conduct second policy adjustments in the short term.

This series of economic data, regulatory measures and policy expectations for future market will create a shock to the capital market. In panic atmosphere, the commodity market is going from universal to almost full line, indicating that the multi headed pattern will start to reverse.

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The drop in China's domestic cotton inventory will further expand the demand for imported cotton. The number and price of cotton imports this year has increased substantially compared with last year, because of the current export of cotton in India.

Several downstream businesses are delighted.

The recent sharp rise in cotton prices has also had a different impact on downstream cotton companies.

Cotton prices have remained high before, and cotton stocks in downstream businesses are generally low, and the original cotton purchase plan has been postponed repeatedly. Most of them have a wait-and-see attitude or Limited procurement plan.

Recently, the decline in cotton futures prices has led to a drop in spot prices of seed cotton and lint. According to feedback from some cotton textile enterprises in Shandong, the price of seed cotton has dropped from about 14.4 yuan per kilogram a day to about 13.4 yuan per kilogram, and lint price has dropped from 32000 yuan / ton to about 29000 yuan / ton.

The downstream enterprises showed the phenomenon of mutual concern: on the one hand, the purchase price of seed cotton plummeted, and some large textile enterprises also continuously lowered the purchase price of lint cotton, which made cotton growers and Cotton Traders actively sell, and the average daily purchasing amount of purchasing enterprises increased.

On the other hand, the drop in cotton prices will undoubtedly increase pressure on cotton processing enterprises which have already had high price of cotton picking. For example, for the enterprises that bought cotton in the early stage of 14.4 yuan / kg, the cost of processing cotton lint was about 31 thousand yuan / ton, and now the price of lint cotton dropped to 29 thousand yuan / ton. If it is sold now, it will suffer a great loss. Therefore, some cotton factories would rather continue to wait and see, and do not sell lint at a low price.

It can be seen that the market price of cotton is expected to differ.

The main force is cautious about cotton prices.

From the net position of CFTC fund and the relationship between the net position and the futures price of the first 20 main players in China, we can see that the majority has gradually withdrawn from the dominant position.

From now on, the fund maintains a more cautious attitude towards cotton prices, while the net drop in the domestic market is much more confident than before.

It can be expected that if the support of the capital is not available, whether the cotton price in the future market will continue to maintain high operation will be tested.

Cotton prices will remain oscillating in the near future.

As of November 17th, because of concerns about China's possible increase in interest rates and the sharp increase in trading margin, ICE cotton has been down for 5 days. Zheng cotton is also in a deep callback state, with a drop of nearly 20%, and its position has continued to decrease, and the strong momentum of early growth has been curbed in the short term.

According to the analysis of the golden section price ratio of Zheng Mian index daily chart, the corresponding gold support level of 0.618 is 25425, and it is predicted that the late stage of Zheng cotton will oscillate widely in the range of 25425 to 33668.

At present, the support of many factors to cotton prices is far behind that of the previous ones. Especially after the joint announcement by the 7 departments of the national development and Reform Commission on the effective maintenance of the cotton market order, the leading role of the policy direction in the future market can not be ignored. Investors are advised to take the idea of oscillating operation and control the positions in the near future. In the long term operation, we need to pay attention to whether the cotton price will fall below the 25425 position. If this price is supported, there will still be room for further development.