Weak Demand Supports Downward Tariffs To Stimulate Cotton Prices Down

"The current cotton futures paction is not the same as the first half of the year."

Market participants pointed out that cotton prices have fallen to a new platform interval until new cotton comes into the market.

Tariff cut into a fuse

The main contract of Zheng cotton, which tumbled more than 4% on the previous day, once again led the domestic futures market yesterday, down by more than 2%, with a turnover of only 133 million hands, closing at 22235 yuan per ton, with a new low.

Recently, Zheng cotton's consolidation in two months was broken.

Recently, the Ministry of Finance decided to reduce import tariffs on textile materials such as blended fabrics and linen yarns since July 1st.

Stimulated by the news, cotton prices fell by 1080 yuan on Monday, hitting a new low in the year.

Mid Beijing

Futures analyst of Shanghai futures saw thunder, said: "before the upward trend of cotton prices rebounded powerless, multi funds gradually outflow, trading volume shrank to about 1 million hands, the air of its own empty has been gradually strong, import tariffs down directly stimulate cotton prices downward."

Some market participants pointed out that the decline in import tax rate will guide our country to increase imports of cotton textile raw materials. However, the demand for downstream market is rather weak, and the increase in supply caused by import tariff reduction can not solve the demand problem.

Weak demand supports bearish

Xu Jing said that the drop in cotton prices actually reflected the weak demand in the lower reaches of the cotton market.

"The contraction policy of domestic inflation control is obvious for textile enterprises. Domestic textile enterprises are mostly small and medium-sized enterprises. Capital is an important factor in the operation of these enterprises. However, the central bank has continued to tighten liquidity, making these textile enterprises nervous and even some capital chains have been broken.

Limited by capital, it is difficult for enterprises to purchase raw materials in large quantities.

Xu Jing said.

It is understood that at present, the downstream cotton textile enterprises adopt the strategy of making short lists only, consuming cotton stocks or making less production and less production, so as to get through the tightening period of policies.

Insiders also pointed out that, near the end of June, banks were assessed for six months, and loans were tightened. Therefore, cotton enterprises are facing greater pressure to repay loans.

See thunder thunder thinks: "financial strain is the factor that causes cotton city demand to be low.

In addition, this year, downstream enterprises are facing a situation of overall cost increase and huge profit reduction. Enterprises' enthusiasm is being attacked and unwilling to purchase.

The most important thing is that the downstream enterprises are not confident enough and are worried that the prices in the future market will continue to fall and procurement is very conservative. "

The third quarter is hard to beat.

For the future trend of Zheng cotton, analysts believe that the third quarter

"Because this year's cotton purchase price is 19800 yuan per ton, so this is the bottom price of the market. It is estimated that Zheng cotton will be in the range of 19000 to 22000 yuan per ton in the future."

Xu Jing said.

Seeing that the possibility of cotton price falling below 20 thousand yuan per ton has risen, it is expected that the pattern of the weak shock will continue to cotton harvest in the new quarter.

For the future cotton supply, Xu Jing said: "the cotton planting area in the new year will be expanded by 5% over the previous year, so if there is no extreme weather conditions, the supply and demand of the cotton market will be more abundant in the new year.

In this context, cotton prices do not have the conditions for a sharp rise.

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Seeing thunder also pointed out that earlier drought and waterlogging had little effect on cotton growth.

The most important period of cotton weather is the boll opening period, usually in August and September each year.

The two successive reduction in production last year and the previous year was due to persistent wet weather during this period, resulting in reduced quality and reduced production.

He pointed out that if the weather of cotton growing critical period is normal this year, Zheng cotton will continue the weak shock pattern.

If the weather is bad, cotton is expected to cut production, cotton prices are expected to strengthen.

But the strength is also limited. Even if the weather is bad, the cotton price is only a strong shock, and the probability of a new bull market is very small.