Re Understanding The Cotton Market After The Crash

For the first time since the beginning of December, there has been a rebound.

From the early stage of the sharp rise to the recent rapid decline, the general reason is that more than the strong anticipation of excess liquidity in the early stage, excessive overdraft factors of supply and demand are excessive. After irrational inflation, the profit of cotton business is much higher than that of the normal year, reaching a maximum of 8000 yuan / ton, which is beyond the whole industry chain and national recognition level. Under the current policy of China's strict regulation and control of prices, it is a painful experience that must be experienced.

It is necessary for us to re understand the cotton price of over 30 thousand of historical highs in 2010 and then to the rapidly adjusted cotton price so as to provide some references for future investment.

First, the evolution of the spot market after the stalemate of the industrial chain.

Judging from the recent spot chain,

Who can persist to the end? Where is the stage balance?

We boldly assume a simple roadmap in the late stage: the stock of the cotton mill began to take stock, causing the replenishment of raw materials in the cotton mill, further increasing the pace of stabilizing cotton, selling the cotton enterprises on the right track, and raising the price.

The adjustment of policies or the violent fluctuation of external markets may trigger a certain breakpoint in the market.

In any case, how to break the industrial chain after stalemate will be the first element that we must pay close attention to when analyzing the market outlook.

Two, the cotton market, "there is no new capital of the empty stock dance."

Due to the firmness of the national price control policy and the tightening of speculation in the futures market, especially the sharp fluctuations in the cotton market this year, the pursuit of sound funds has been temporarily avoided. The cotton futures show a total outflow of money. As of December 3rd, Zheng Mian's total holdings fell from 481742 to 365010 in November 10th, with a decrease of 24%. If we consider the total 590996 positions in November 2nd, the reduction will be 38%, and the outflow of funds will be very obvious.

ICE cotton also showed similar characteristics.

From the change of positions, there are major changes in the main market.

The main force of the main force is turning to the short end, but there are some new seats, including the Zhejiang earth, Guotai Junan, Haitong futures and the new lake futures which have completed the multi replacement. While the short side, the main force of the Yangtze River futures is the biggest bear, while COFCO futures and Zhejiang Yongan are also turning into empty positions.

In the middle of Shanghai, the operation of China Securities Futures is relatively frequent.

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As a whole, the state policy is very firm in terms of the price control intention, and the futures market margin and fees have been adjusted. The SFC has increased the monitoring of the futures market, so that some funds have been temporarily avoided, and the cotton market has entered the stage of dancing among the stock funds.

Divergent views on the cotton market have also created the market oscillation situation.

Three. Where does the present round go down?

The soaring price of cotton is unbearable for the downstream enterprises of the state and industrial chain, but the sharp rise and fall of cotton prices also cause great harm to the development of the industry, and it is also a phenomenon that the state and industry chain participants are unwilling to see.

However, the degree of cotton price is reasonable. It is reasonable to use historical statistics or supply and demand perspective, but it needs to be further weighed.

In recent years, the state's regulation of price stability is unprecedented. However, it is discovered that the state hopes that the commodity prices in the early stage will rise to a certain level of foam extrusion and remain at a relatively reasonable level. This level can not cause the decline of farmers' production enthusiasm, take into account the factors of inflation expectations and the factors of continuous increase in production costs.

Therefore, the efforts to suppress national policies will continue to strengthen in the middle of the hoarding of commodities and in the speculation of idle capital.

As a result, cotton is now largely stuck in the middle link. Whether the country can stop the policy's suppression at the beginning of the present slight cost and the selling price upside down, and give the middleman a chance to relax, is a question that needs to be considered.

Whether the price of 30000 cotton or 26000 of cotton prices, or 20000 of cotton, is considered to be absolute high price considering the absolute price. But behind it is a game of high and low demand for cotton supply and demand.

Of course, too low prices are also expected to be taken into account in the 2010/11 reserve deficit.

Four, the two cornerstones commonly recognized by the market

1, the cost of hoarding cotton: this year's significance is significantly heavier than previous years.

Breaking through 7 yuan / Jin, the price is kept at 5.8 yuan / Jin level, and the cost of lint is generally at 26000-27000 yuan. After mid November, the price of cotton seeds has been lowered as a result of falling prices at home and abroad and lower cotton yarn prices. In some areas, the price of seed cotton has dropped to 5.0-5.5 yuan / kg interval, and the cost of lint cotton has been kept at 23000-25000 intervals. However, due to the small number of enterprises, the cost of lint hoarding for this year is more concentrated at 26000-27000 yuan level. It is precisely because of the support of this cost factor that the hoarding enterprises generally insist on not selling. The relative price of lint in Xinjiang is higher than that in the mainland, and the cost of lint is relatively higher than that in the mainland, which is roughly 27000-28000 yuan. In the current year, the price of seed cotton has gone up. The high price of throwing and storing in the new and old year has resulted in a high price of lint cotton. The price of seed cotton has been opened directly around 4.5 yuan / Jin, and has been soaring all the way.

So, what is the significance of the cost of lint this year? Will it not fall behind in the future? Is it possible for the futures market to fall below the previous low of 24170 yuan (November 29th), which is likely to continue to strengthen the regulation stage before the national holiday.

Judging from the characteristics of cotton spot market in past years, cotton prices tend to rise, and the market generally feels that resources are scarce. Once the national control measures are introduced, cotton prices will become soft. The market is full of cotton and prices will go down.

First of all, the state's regulation and control in the cotton industry has been obviously overstretched (reserves of only about 300 thousand tons, the adjustment of sliding tax is facing the embarrassment of foreign cotton and its limited international export resources), and the later stage is more comprehensive. Secondly, the long-term inventory of China's cotton market is hidden. After the excessive consumption of the first two years, the data of China's cotton have gradually become clearer. At present, enterprise inventory is basically the acquisition of resources this year, and the volume and price are very easy to determine. Finally, in 2010, China's cotton business profits exceeded the level of any time in history, the ability to resist risks increased and the capital strength improved, which in turn became some favorable supporting factors for enterprises to adhere to the cost this year, at least enterprises could stick to it until March next year. For this year, the author

2, rigid gap: sooner or later, there will be a manifestation of {page_break}.

The US export task 85%-90% has been signed for export this year, and China's contract ratio is 40%, roughly 1 million 200 thousand tons, completing the import task of about 3 million 200 thousand tons, and the later import volume will reach 2 million tons. We can imagine that from December to July next year, for 8 months, how much international resources can be imported to China, and the uncertainty of India cotton's exports and policies, the enterprises themselves are not confident enough.

Looking back at the Chinese market, according to the first research group of futures cotton, Xinjiang's output is estimated to be around 2 million 500 thousand tons this year, and inland production is hard to exceed 3 million tons. Therefore, the probability of cotton output this year to maintain 550-580 million tons is very large, not only significantly lower than the 680-710 tons reported by the media before, but also difficult to achieve the current 630-650 tons of data released by some of the latest statistical agencies.

From this point of view, the supply of the market may become loose in the 1-3 months of 2010, but prices remain high. After that, the resources of the cotton market still show a rigid gap.

Five. Conclusion

From the perspective of the spot industry chain, based on our analysis of the intermediate enterprises and downstream mills, the price has a strong probability of stabilising at 2.4-2.6 million, but the policy is always an uncertain factor, which may suppress the price looking for a new low level range. But in a big direction, the commodity prices have appeared a certain decline in the recent regulation process, and it seems to be gradually clear.

At present, the market can enter the close observation period. Short term consideration is more based on the technical point of view, the difficulty of operation has increased, and the short term fluctuation may be subject to certain restrictions. Investors can temporarily grasp the interval of 24 thousand -2.6 ten thousand high throwing low suction operation, but regardless of the current short time operation, the same need to do a good stop loss settings, try to avoid unnecessary loss expansion.

From the perspective of trend, the policy will adjust the market tempo in the background of the tight supply and demand in the late stage of this year, but it is expected that the overall situation will continue to rise in the future.

Long term large fund participants can buy in the next policy adjustment node or according to their investment habits, or buy a market quickly, or quickly return to the market.

The main risk factors lie in China's overall price control policy, expected changes in planting area next year, the uncertainty of India's export policy, and systemic factors.