Cotton Price: Policy Led Market

Cotton supply

Global cotton continued to increase production in 2011, the global supply of cotton was relatively loose last year, the international supply of cotton was slightly larger than the demand for 2 million tons, and the global cotton consumption increased from 40% in the previous year to 48%. The domestic cotton was listed early and the cotton production was expected to be large, and the cotton in the 2011 year was all cotton.

Although the continued increase in intra and outside cotton prices will attract traders to increase cotton imports, the actual imports will be subject to the policy of import cotton.

China's cotton imports from the United States and India account for the proportion of cotton imports over the years.

In 2011 1-10, China imported 2 million 195 thousand tons of foreign cotton. It is estimated that in November and December, the number of imported cotton in China is about 250 thousand tons. In September 2011 -2011 December, the number of cotton imports in China was about 100-120 tons.

In the first eight months of 2012, the import volume is estimated at around 1 million 200 thousand tons.

Considering the uncertainty of the quota and time of import cotton quotas in 2012, in order to stabilize domestic cotton prices and reduce the impact of low priced imported cotton on the domestic market, it is not ruled out that in 2012 countries will reduce or postpone the quota of imported cotton, or adjust the quasi tax level of imported cotton.

Cotton consumption

China's textile and clothing exports showed a trend of decreasing price in 2011. Although the total export volume maintained a relatively high growth rate, the export volume was only flat or even reduced.

In 2012, the total volume of textiles and clothing exported to Europe will decline considerably, and the export situation of textile industry in the first half of 2012 is not optimistic.

As cotton prices are relatively stable, and cotton yarn prices continue to fall, spinning profit margins narrowed, textile enterprises lack of order, resulting in insufficient operating rate, cotton demand has not improved.

Judging from the inventory level of finished goods in textile enterprises, the stock of gauze in textile enterprises has decreased, but the reduction of orders has kept the enterprises in the process of de stocking.

As expected cotton prices in 2011 will not fluctuate too much, traders' inventory will be reduced, and textile enterprises will resume to buy Cotton with the purchase method before 2010.

The low inventory of traders and the way of purchasing cotton used by textile enterprises will affect the fluctuation of cotton prices faster.

Temporary purchase and storage support for cotton price stage

The impact of the temporary purchase and storage policy on the market in different stages in 2011 is different.

In the early days of the acquisition, the higher market cotton prices must be closed to the purchase and storage prices in order to facilitate the paction.

During the period of acquisition, the pressure of new cotton listing will increase, the rhythm of purchasing and storage will reflect the anticipation of the market and the strength of the state support market. The planned storage capacity and the actual volume will continue to expand, which will form a certain support for the market.

At the end of the acquisition, the reduction of listing pressure and the reduction of circulation resources will make the spot price and futures price concussion near the purchase and storage price, making it easier for enterprises to find opportunities and purchase appropriate resources.

The return of traditional regulation means

The purchase and storage of lint is difficult to support the price of seed cotton, cotton yarns and downstream textiles. Low price imported cotton and imported cotton yarn may also impact the market. In order to guarantee the support of the state to cotton market, the country is expected to make a series of adjustments in cotton policy.

In terms of policy, we should pay attention to four points:

First, whether the quota system of imported cotton will be adjusted, whether the quantity will be reduced, whether the rhythm will be postponed, and whether the imported cotton quasi tax formula should be adjusted.

The two is how to determine the price of the temporary purchase and storage in 2012. It is expected to be determined by the end of March 2012. If we refer to the benchmark for the previous year: the cotton wheat ratio is 1 to 10, the price of storage and purchase in the next year should reach 21200 yuan / ton.

Three, how will the price and form of dumping be determined if the state throws a reserve for stabilizing cotton prices?

The four is whether the country will impose certain restrictions on the import of cotton yarn.

Cotton prices will continue to narrow down under the support of purchasing and storage, but with the number of contracted storage increased to about 2 million tons, the supply and demand relationship of domestic cotton market will be improved.

But in the long run, cotton prices depend on the needs of the textile industry for a long time.

The important node of cotton price trend needs to pay attention to four possible adjustments to cotton policy. If there is no improvement in the macro-economy after the end of the purchase and storage, the large-scale structural adjustment of the textile industry will not exclude the risk that cotton prices will continue to fall.