New Cotton Reduction, Spot Driven Futures Rise

At the end of August, Zheng cotton launched a sharp wave after breaking through the high point of the year.

New cotton reduction, spot driven futures rise

The weather has been unfavourable since the planting of cotton this year. The low temperature and rainy weather delayed the growth of cotton.

However, due to the cotton bolting stage, the main period affecting cotton yield is the yield forecast before the end of August. The report issued by the Ministry of agriculture and other organizations has indicated that if the late weather is good, the output of cotton in the whole country is expected to reach 7 million tons, which is flat or slightly increased compared with last year.

This is based on a fairly optimistic forecast of good weather. But since late August, the main cotton producing areas in China have been continuously rainy, and the original optimistic expectations have been gradually broken down.

At present, the market generally expects that the output of new cotton will probably be less than 6 million tons this year. Moreover, due to the recent rainy weather, the quality of cotton will obviously decrease, and the output of high-grade cotton with a grade of three or more will be greatly reduced.

Under this expectation, the purchase price of new cotton reached 4 yuan / Jin this year, but the progress of acquisition was slow. Then the purchase price went up all the way. So far, the purchase price of grade three seed cotton has reached 5.5 yuan / Jin, and some areas even reached 6 yuan / Jin.

According to this price, the cost of lint processing is over 24000 yuan / ton.

At the same time, in order to ease the domestic cotton supply shortage situation, the state began to throw 600 thousand tons of storage from August 10th and added 400 thousand tons in September 26th.

The rising price of reserve cotton has also been a factor in promoting Zheng cotton's rise.

As of October 12th, the reserve cotton has been put in 790 thousand tons, and the remaining 210 thousand tons will be sold out in about 7 working days.

Spot driven futures are rising, and spot prices are always higher than futures prices, which is a major feature of the cotton market at present.

Expansion of domestic cotton supply and demand gap

The situation of domestic cotton reduction is clear, but the actual output is still unknown.

Although the recent appreciation of the renminbi has put pressure on the export oriented textile industry, there has been no sign of significant reduction in cotton consumption demand.

The US Department of agriculture maintains the forecast of 10 million 886 thousand tons of cotton consumption in China in the October supply and demand report, and increases the global cotton consumption by 52 thousand tons to 26 million 294 thousand tons.

With the expected production reduced and consumption unchanged, domestic cotton supply and demand gap will further expand to 4 million tons.

After the completion of the recent 1 million tons of dumping, the remaining cotton reserves are estimated to be less than 500 thousand tons, which is only enough for strategic reserves and will no longer have the ability to increase market supply.

On the import side, although the output of cotton in the world is increasing this year, the output of major cotton exporters in the United States and India has increased significantly, but the importing countries are actively purchasing in the international market, and the quantity available for China's imports is not much.

As of September 30th, the United States has signed the export of 2 million 101 thousand tons of land cotton this year, completing 63% of the annual export target.

Among them, China signed 595 thousand tons of imports, accounting for only 28% of US cotton exports.

The US cotton surplus can be exported to about 1 million 200 thousand tons.

India has registered cotton exports since October 1st. At present, the export registration volume has reached 935 thousand tons of its export quota, and as of 12, 269 thousand tons of cotton export registration has been approved.

The number of India cotton imports signed by China is unclear.

In addition, taking into account the shipment cycle of imported cotton, the arrival time of imported cotton in large quantities is after the Spring Festival.

Therefore, through the issuance of import quotas and other means, it is also difficult to have immediate effect on easing domestic supply and restraining cotton prices in the short term.

Textile industry is on the line of loss.

The recent rise of cotton has driven cotton yarn and cotton cloth to go higher, but cotton yarn and cotton cloth are not as good as cotton, and the profits of textile mills have been gradually reduced.

At present, the price of the 32 yarn is 32000 yuan / ton, and when the three grade cotton price exceeds 25000 yuan / ton, the textile industry will fall into a state of total loss.

According to the survey data of the China Textile Information Network at the end of September to the large scale textile enterprises, the stock of spinning enterprises in the end of September is 915 thousand tons, which is equivalent to a month's cotton consumption.

Before this part of the cheap cotton is consumed, the textile industry can still bear the current high cotton price.

Recently, however, there have been some small textile mills limiting production and shutting down production.

Later, if the price of cotton yarn can not be fully followed up, and the price cost can not be smoothly pmitted to the downstream, the scope of the textile enterprises will be extended, which will have a greater impact on cotton demand.

Based on the above analysis of basic supply and demand, I believe that Zheng cotton has not yet reached the top.

Zheng cotton has been in a state of relative spot discount. If Zheng cotton can not go up to the spot, no seller is willing to register the warehouse receipt.

Therefore, as long as the purchase price of new cotton does not show a significant decline, Zheng cotton will remain strong.

However, Zheng cotton continued to rise sharply, has accumulated a lot of profit making, technically adjusting demand.

In addition, the recent market rumors that the state will introduce regulatory policies, the Xinjiang region has taken restrictive measures for the loan of cotton middlemen, and has also shaken the cotton team's military spirit.

Zheng cotton short-term adjustment is inevitable, after the end of the adjustment is expected to go up to another level.

For the late operation of Zheng cotton, the author makes two assumptions: first, if the cotton price and cost are not smooth enough, a lot of textile enterprises will stop production, then the cotton price inflection point will appear after a large number of new cotton market, that is, after November; second, if the cotton yarn price is fully rising or even rising, the cotton will go up all the way, until the next 3 and April new cotton sowing area will increase sharply.