Domestic Cotton Consumption Bears National Burden.

Affected by the extreme weather in the main cotton producing areas both at home and abroad since April and the loan repayment made by the Agricultural Development Bank this year, the CF1109 contract has been oscillating on the 25000 line, and the main force has moved to the 1201 contract in the far month.

With the late main production area, the weather is difficult to improve in the short term. cotton The pattern of near weak and far strong will continue, and arbitrage opportunities between CF1109 contracts and CF1201 contracts will emerge.

Extreme weather supports strong contracts in the long term

Since April, the rainfall in most parts of the southeastern United States has reached only half of its normal level. The temperature in the recent cotton area has continued to rise. The proportion of drought severity reaches 8.2%, the highest proportion since 2008. It is estimated that in the next two weeks, most of the above areas will continue to heat up. The cotton planting area in the southeast area accounts for about 80% of the total cotton planting area in the United States, so the cotton yield will be greatly affected.

In addition, the precipitation in the middle and lower reaches of the Yangtze River has been exceptionally low this year. The average precipitation in Hubei, Hunan, Jiangxi, Anhui, Jiangsu and other provinces is at least the same period in the past 60 years, with severe drought in some parts of Hubei, Hunan and Jiangxi, which has adverse effects on the growth of new cotton.

The inflation situation is grim and the government's tightening efforts are expected to increase.

Since 2011, China has raised interest rates two times and raised the deposit reserve ratio by five times. Monetary environment Tighter than last year, after the central bank raised the deposit reserve rate again in May 12th, the deposit reserve ratio of large financial institutions and small and medium-sized financial institutions in China has reached 21% and 17.5% respectively.

In April, China's consumer price (CPI) increased by 5.3% over the same period last year, 2.5 percentage points higher than the same period last year. It is widely expected that the central bank will raise interest rates or raise standards before and after the Dragon Boat Festival. Cotton spinning enterprises generally have narrow financing channels.

It is reported that the order issued recently by the inward agricultural development bank is 85% of the loans to be returned at the end of May, which is 15 percentage points higher than the previous 70%. The pressure of the loan repayment has undoubtedly exacerbated the weak atmosphere of the market. In order to return the loan, the four level of the Bachu public security examination has been reduced to 23500 yuan / ton, and the pressure of cotton rising this year has increased.

Domestic cotton consumption will face greater pressure.

Due to the increase in textile production and production, the average monthly use of cotton has been significantly reduced, and most of the raw material stocks of small and medium-sized enterprises can only be maintained for about half a month. Recently, domestic and foreign cotton prices have tended to be stable, but they do not mean increased demand. They are only the result of high level of scarce resources and temporary replenishment.

In addition, recent overseas Cotton yarn price A big drop will occur, and the internal and external spreads will increase. If cotton yarn imports increase, domestic cotton consumption and imports will face greater pressure.

USDA weekly export volume has been negative for weeks.

Last week, the US Department of Agriculture announced the US cotton export report from 13 to 19 May. In the week of 2010/2011, the number of contracts cancelled by the US upland cotton exceeded the new contract volume, resulting in net export volume of -0.75 million tons, and US land cotton export volume of 56 thousand and 800 tons, a decrease of 20% compared with the previous week, 31% lower than the average level of the previous four weeks. According to the US cotton export report, in April, China cancelled 33 thousand and 800 tons of US cotton import contract. It is expected that the cotton contract volume of the current year will continue to maintain the current situation.

In short, as the drought continues, cotton will maintain a near weak and far stronger pattern. Investors can choose to sell near and far away investment strategies in order to avoid the risk of price fluctuation.

The trend of cotton prices in the future should be concerned about the weather changes in the main cotton producing areas of the world, as well as the US dollar index and the trend of international commodities.