Cotton Variations: From Madness To Rationality

For the cotton price operation in 2010, we can see three distinct fluctuations in the technical figures. This also corresponds to the three stages of cotton price trend: the first stage, the gradual increase; the second stage, the sharp rise; the third stage, after a sharp fall, stabilizes.

Stage 1: gentle uplink

Review of market situation

Starting in 2010, raw materials for textile enterprises Stock Relatively large volume, slow turnover in the market, high cotton prices hovering. In January 4th, China's cotton price index (grade 328 cotton) was 14879 yuan / ton. 1~2 months, cotton imports increased considerably over the same period. According to statistics from the General Administration of customs, China imported 221 thousand tons of cotton in February, an increase of 128 thousand tons compared with the same period last year, an increase of 137.6%. In this month, 1~2 cotton imports totaled 532 thousand tons, an increase of 361 thousand tons compared with the same period last year, an increase of 211%.

In March, with the rapid growth of textile and clothing exports, domestic cotton spot prices continued to grow, and the price at the end of the month increased by more than 1100 yuan per ton compared with the beginning of the month. In April, business inventories increased, procurement slowed down and prices rose steadily. In May, the macro-control department increased the quota of 800 thousand tons of imported cotton. However, influenced by the cotton embargo policy issued by India, the overall tightening of market resources intensified, and cotton prices rose again. The month's increase also reached 1000 yuan / ton. At the beginning of June, the state's macroeconomic regulation and control policy was promulgated, and the quota of 800 thousand tons continued to be increased, and the plan of dumping and storage was formulated. In July, the market demand declined, coupled with the impact of macroeconomic regulation and control policies, the first decline in July this year, but the decline was not large, and by the end of August, it dropped by 350 yuan per ton.

News review

The China Cotton Textile Industry Association held a situation analysis in mid July in Shijiazhuang. Forum In order to reduce the operational risks of cotton textile enterprises, the conference called on enterprises to achieve zero inventory of products. At the end of July, the Commission was convened by the Commission of development and Reform Commission to hear the relevant opinions on the delivery of cotton reserves.

To ensure market demand, the authorities began selling 600 thousand tonnes in August 10th. Cotton storage Cotton textile enterprises are active in cotton market due to tight cotton market. However, the spot market and high grade resources are scarce, and the average transaction price presents a low and high trend.

Reporter comment

Supported by the continuous recovery of the global economy, the recovery of the international market demand, the positive macroeconomic improvement in China's domestic market and the continued prosperity of the domestic demand market, the production and sales of China's cotton textile industry has rebounded rapidly, and the growth of cotton yarn has led to the growth of cotton demand. Affected by weather factors, cotton production decreased and quality decreased in the previous year, and the output was less than 7 million tons. This change in supply and demand has become the basic reason for the rise in cotton prices this year and the basis for the next stage of the market.

Unlike the cotton price rise in previous years, international cotton prices continued to rise under demand pull. Driven by the rapid rise of cotton prices, cotton yarn prices are rising more rapidly. The trend of gauze price curve is similar to cotton price trend, and there is no obvious lag. The rise in cotton yarn prices in turn drives cotton prices up.

Second stage: Crazy rise

Review of market situation

In September, new cotton was coming on the market. Influenced by many factors, such as the expansion of supply and demand gap, the delayed listing of new cotton, the general rise in agricultural prices and market speculation, cotton futures, electronic matching transactions, throwing and selling prices, spot prices and seed cotton purchase prices have risen sharply and rapidly, even at a record high. In the new cotton market, there was a rush to buy and buy, the order was more chaotic, and the quality of cotton decreased. As the price goes up, the purchasing and selling price of processing enterprises is upside down, and the risk of textile enterprises is increasing. In September, China's cotton price index (CC Index328) reached a maximum of 22684 tons, a monthly increase of over 4600 yuan / ton, and the monthly average price of 19324 yuan / ton, up 6.6%, up 48% over the same period.

In order to meet the needs of textile enterprises, the departments concerned decided to increase the 400 thousand tons of throwing and storing again. Affected by market factors, the month of selling and selling prices rose sharply. With the reduction of resources, the resources in the spot market are very thick, and the competition for cotton reserves is fierce. The rise in cotton prices has directly promoted the spot price and the purchase price of cotton in the new year - the highest purchase price of standard grade seed cotton has reached more than 14.4 yuan per kilogram.

In October, 1 million tons of throwing and storage were all over. The number of new cotton purchased by textile enterprises increased, and the transaction price rose further. The average monthly price of China's cotton price index (CC Index328) is 19324 yuan / ton, up 28% from September, increasing by an average of more than 200 yuan per day, the highest being close to 27 thousand yuan / ton. In the same period, the price of electronic matching and cotton futures rose even more, and the price of major contracts exceeded 28 thousand yuan / ton at the end of the month.

At the beginning of November, cotton prices continued to rise at home and abroad. In November 9th, the Cotlook A index climbed to 166 cents / pound. In November 11th, China's cotton price index (grade 328 cotton) rose to a record high of 31302 yuan / ton.

News review

In September 18th, the China cotton textile industry association was commissioned by the NDRC to hold a forum on cotton issue in Beijing. China Cotton Textile Industry Association reminds enterprises to pay close attention to changes in cotton production and textile situation at home and abroad, dispassionate analysis, rational response, do not follow the trend of speculation, and guard against operational risks. The representatives of the participating enterprises said that the sharp rise in cotton prices was unexpected, and cotton prices had exceeded the affordability of most textile enterprises.

In September 26th, in order to stabilize cotton prices, relevant departments of the state issued an additional 400 thousand tons of cotton reserves through the association, while at the same time stopped the qualification examination of textile enterprises without entering the market, and increased the daily turnover to 30 thousand tons.

In September 27th, the national cotton teleconference conference was held. The relevant departments put forward the state's ability to guarantee the cotton demand of enterprises, and issued five measures to control cotton prices. It pointed out that there is a lot of speculation in the market at present, and enterprises should pay attention to guarding against operational risks.

In October 29th, seven ministries, including the national development and Reform Commission, the Ministry of agriculture, the Ministry of railways, the State Administration for Industry and commerce, the State General Administration of quality supervision and quarantine, the supply and Marketing Cooperative headquarters and the China Agricultural Development Bank, issued an urgent notice on the cotton issue. The notice requires that we strengthen the guidance of cotton purchase and marketing, earnestly safeguard the order of the cotton market, protect the interests of farmers, and maintain the basic stability of the cotton market.

Talk about cotton

Zhang Xiaoqiang, deputy director of the national development and Reform Commission: at present, the fluctuation of cotton prices has much to do with speculation in the market. The rise of cotton prices in the domestic market from the fundamentals of supply and demand is not sustainable. Cotton demand will continue to grow in the new year, but the growth rate will slow down. Domestic cotton production and demand gap will be slightly larger than that of the previous year. The domestic cotton market has some difficulties in stable operation, but efforts can achieve a basic balance of total supply and demand of cotton.

Xu Wenying, vice president of China Textile Industry Association and honorary president of China Cotton Textile Industry Association, according to estimation, there is a gap of 3 million ~400 million tons of cotton supply this year. It is precisely to see the contradiction between supply and demand of cotton, a large number of hot money to participate in the cotton speculation, and promote the soaring cotton prices. The top ten buyers of cotton futures market are not textile enterprises, which fully illustrates this point.

The high cotton prices caused some cash flow difficulties in some textile enterprises. Cotton prices rose too fast to make textile prices and cotton prices rise at a different pace. Cotton prices were unstable, causing textile enterprises to dare not offer quotations, and afraid to receive large single orders, which seriously affected the normal production and operation of textile enterprises.

Zheng Zhiyi, honorary president of China Chemical Fiber Industry Association: at present, cotton prices have seriously deviated from the fundamentals of supply and demand, and there is a big bubble. Although the rise of cotton prices is beneficial to the chemical fiber industry, it also aggravates market risks.

The head of a cotton textile enterprise in Sichuan: This is the highest cotton price in more than 10 years since the state released cotton price in 1999. In recent days, cotton (ton) has risen several hundred yuan a day, or even thousands of yuan. The recent increase in cotton prices is much faster than the increase in cotton yarn, which greatly compresses our profit margins. In my view, the possibility of further rise in cotton prices is still great, but there is little room for cotton yarn to go up. The sharp rise in cotton prices has caused great pressure on us.

Li Ping, general manager of Nangong Bailong Textile Co., Ltd.: cotton price doubled this year, but the price of terminal products is difficult to raise. Even if the price rises, it is far lower than the increase of cotton price.

Zhang Yunhai, chief executive officer of Hebei de Kai Textile Co., Ltd.: cotton prices are going up all the way, and we don't know how to bid. The price of cotton has risen to 30 thousand yuan / ton, which has deviated from the law of value. It also makes everyone feel at heart.

Third stage: rational fall {page_break}

Review of market situation

Cotton prices, which have been soaring since mid September, suddenly changed in mid November, turning to a straight line. On November 11th and 12, cotton futures prices continued to fall for two consecutive days, and futures prices continued to fall. Spot prices also fell in November 12th. In November 16th, China's cotton price index plummeted 1070 yuan / ton, hitting a new low since last year. According to the national development and Reform Commission's monitoring of domestic commodity futures trading prices, domestic commodity prices have dropped sharply since November 12th. Cotton declined the most.

After a sharp fall, domestic cotton spot prices stabilized at the end of November, and both futures and international cotton prices rebounded.

News review

In November 8th, the seven departments of the national development and Reform Commission issued an urgent notice, putting forward six measures to maintain the order of the cotton market and stabilize the market price of cotton.

In November 17th, the executive meeting of the State Council clearly put forward that we should increase the external transport capacity of Xinjiang cotton. We should rectify the purchase order of major agricultural products and ban unlicensed acquisition and processing cotton without evidence. We should strengthen supervision over agricultural futures and electronic trading markets, curb excessive speculation and ban illegal transactions. We should improve laws and regulations on price supervision and increase penalties for illegal activities. We should strengthen law enforcement and focus on combating malicious hoarding, driving up prices, disguised price increases, collusion in price increases, collusion in price increases, and other illegal acts, and severely punish vicious speculation.

Talk about cotton

Xu Wenying, vice president of China Textile Industry Association and honorary president of China Cotton Textile Industry Association: the decline of cotton prices is a revised regression after the early market excessive speculation. Earlier, soaring cotton prices brought huge market risks. This rise is not driven by rigid demand, and it will fall back from the fundamentals of supply and demand.

As domestic cotton prices fell for a long time, spinning enterprises reacted strongly. The huge fluctuation of cotton price implies a great market risk. Textile enterprises, especially small and medium-sized enterprises, will be greatly affected.

Zhang Yunhai, chief executive officer of Hebei de Kai Textile Co., Ltd.: cotton prices are up and down, which we are most afraid of, which will disrupt the normal production and operation order of enterprises.

Responsible person of a well-known cotton textile enterprise in Shandong: textile enterprises should not be excessively sensitive to cotton prices, or concentrate their efforts on the production and operation of enterprises.

Reporter comment {page_break}

Under the pressure of national macroeconomic regulation and control efforts, the withdrawal of hot money from early speculation in cotton speculation has led to a sharp fall in cotton prices. The industry chain has a strong atmosphere from top to bottom, and the number of new orders is relatively small, and the market turnover is light. However, the actual contradiction between supply and demand still exists. In a period of time, cotton prices will be mainly oscillating at high levels, and respond to the demand and supply of cotton at home and abroad in real time.