Cotton Market Suffers From Oversupply

As the world's cotton production increased significantly in 2011, it is estimated that the world's cotton market will be oversupplied in 2012, and China's imports will further expand. At the same time, the reduction of cotton planting efficiency will result in a significant reduction in the global cotton planting area in 2012, and China's import of large quantities of cotton will become an important factor leading to the rise of the international cotton price band.

　 Sowing area decreased and demand increased.

　　 American cotton expert Dr. Cleveland It is believed that spring sowing in 2012 is not far off, and that the current contract in December 2012 is less than 90 cents. As the seeding date approaches, the December contract will gradually increase to more than 90 cents. However, unless cotton prices rise to more than 100 cents per pound, the cotton planting area next year will be greatly reduced. It is estimated that the global cotton planting area will be reduced by 10% in 2012. The reduction in the southeastern United States will be 10%, the central and southern region will be 7%, the upland cotton in the western region will be reduced, the Pima cotton will increase by 300 thousand mu, and the rate of abandoned cultivation in Dezhou will decrease significantly.

The national cotton market monitoring system launched nationwide cotton planting area survey in 2012 nationwide. The samples were taken from 15 provinces (autonomous regions), 89 cotton planting counties (cities, farms), and 4493 designated cotton planting information contact households. The survey showed that the cotton planting area in China was 72 million 941 thousand mu, a decrease of 6 million 476 thousand mu compared with that of the previous year, with a decrease of 8.2%.

Because the production of agricultural products is irreversible, the cotton production area has a certain trend. The production area has a certain periodicity, which is one of the reasons leading to the cyclical nature of cotton price.

On the other hand, from 1989 to 2011, there was a strong correlation between the global sowing area and the Cotlook-A index of the year (except in the three year from 1999 to 2001). It can be estimated that Cotlook-A has basically changed by 1 percentage points and the cotton area has changed by 0.3 percentage points. However, the cotton planting area in the next year will have a reverse constraint on the price of the next year, which will affect the sowing area of the next year. This will make the price and planting area not always monotonically evolve in one direction, which will lead to fluctuations and periodicity in price and planting area.

Cotton planting will begin in a few months in 2012. Global cotton prices have dropped sharply this year after reaching a record high in 2010/11. The income of cotton farmers is affected, and the competitiveness of cotton prices is the first time in the past 3 years than other alternative crops. In addition, the cost of agricultural production in 2011/12 has also increased. Therefore, the International Cotton Advisory Committee (ICAC) predicts that the global cotton planting area in 2012/13 will decrease by 8% to 33 million 300 thousand hectares over the same period, and the output will decrease by 6% to 25 million 140 thousand tons. The fall in price is the main reason for the decrease of cotton area.

Cotton harvest area of the world's major cotton producing countries, including China, India, Pakistan, Brazil and Turkey, will be reduced in 2012/13. However, the United States, Uzbekistan and Australia will be excluded. Although the US cotton planting area is not expected to be high next year, the proportion of expected harvest is likely to decrease. Australia's irrigation water is expected to be relatively abundant, so the area of cotton is stable. In the coming months, cotton planting intention will be determined, and the main factors will be cotton farmers' income and the price comparison with other crops. {page_break}

For two consecutive years. Consumption reduction After that, global cotton consumption is expected to increase in 2012/13. The anticipation of the global economic recovery is the main reason for predicting the growth of consumption, which will stimulate the growth of global textile consumption. ICAC forecasts that global cotton consumption will grow by 3% to 25 million 20 thousand tons next year, and the main growth will be in Asia. The increase in textile consumption and the fall in cotton prices will promote the global cotton trade volume, and import and export will increase by 9% to 8 million 400 thousand tons. The gap between China's production and marketing will be further expanded. In 2012/13, China's output will be 6 million 330 thousand tons, and consumption will be 9 million 830 thousand tons, and imports will increase by 11% to 3 million 570 thousand tons. US exports could increase to 2 million 760 thousand tonnes, up from 2 million 325 thousand tonnes this year and 3 million 130 thousand tonnes in the previous year. As 2012/13's global output and consumption are basically flat, output is 25 million 140 thousand tons and consumption is 25 million 20 thousand tons, so the final inventory will increase by 123 thousand tons to 11 million 620 thousand tons.

The US Department of agriculture (USDA) estimates that the decline in global consumption will lead to an increase in final inventory. At the beginning of the year, inventories increased by 59 thousand tons, which was affected by the US production cuts and output by 102 thousand tons. It is worth noting that consumption is greatly reduced due to the global macroeconomic uncertainty and the gradual decrease of cotton ratio in textile mills. As a result, market demand continued to be weak and consumption fell by 638 thousand tons, of which 218 thousand tons were cut in India and 109 thousand tons in China and Turkey. Despite the decrease in consumption, it is expected that China will increase its import volume after the purchase and storage, thereby increasing the volume of Global trade. The final inventory rose 590 thousand tons to 12 million 556 thousand tons, and the inventory consumption ratio increased to 51.8%.

　 Inventory backlog cotton prices down

Affected by the supply and demand factors of global cotton fundamentals in last year, especially the further decline of global demand, the market downturn is aggravated. Cotlook statistics show that demand for textile enterprises has not risen as expected, but has declined to a certain extent. Consumption is expected to decline by 7% over the same period last year, mainly due to high historical cotton prices and sharp fluctuations in the market. It is expected that when prices return to a reasonable level and the market tends to be stable, including the recent contracts, the market will quickly attract interest from textile enterprises, but now this expectation is too optimistic. The market demand of cotton yarn is the key to the cotton industry chain. In recent years, the market demand for cotton yarn has been sluggish, which has led to the widespread purchase of textile enterprises, and not the accumulation of raw materials inventory.

In terms of market circulation, some people in the industry believe that although the demand forecast has been lowered, the consumption situation may be overestimated. On the demand side, the new harvest of the northern hemisphere is picking up and the harvest is coming to an end. It is estimated that the world's cotton output will exceed 27 million tons for the first time. Due to the sluggish consumption, it is estimated that over 3 million 600 thousand tons will be oversupplied this year, which is exactly the opposite of the subsequent bull market in short supply in 2009/10. The situation in the Chinese market is also the focus of the market. By the end of December, China's cotton storage and storage volume was nearly 2 million tons, a significant increase compared with October. At the end of October, the storage data was 118 thousand tons, of which 69% came from Xinjiang. In addition, China also purchased a lot in November. Outer cotton 。 According to statistics from the US Department of agriculture (USDA), China signed a total of more than 1 million tons of cotton in the fourth quarter.

The price of chemical fiber continues to rise due to the rise in crude oil prices. From the comparison of the monthly average price of polyester staple fiber with the price of 328 cotton, we can know that the price difference between cotton and polyester staple after National Day is negative as cotton prices drop sharply and polyester continues to rise, which will stimulate cotton demand. In recent years, with the increase of cotton production in the world, the consumption of chemical fiber products has increased year by year. The growth of global chemical fiber consumption is more than that of cotton. In 2012, the growth of chemical fiber consumption is likely to continue to grow, resulting in a slow growth in cotton consumption.

The wheat seeding time was around October, and the next year began to harvest in May. Cotton basically began sowing in late 4. Wheat cotton Rotation is usually carried out in cotton fields with no harvest in April. If cotton prices are too low, farmers prefer not to grow cotton. Therefore, there exists a price parity relationship between cotton and wheat, which will determine the production area of the two crops, which is mainly determined by net income per mu. At present, futures prices of grain and cotton are around 1:9, which is below the normal ratio of 1:10. Therefore, cotton price and cotton wheat ratio will enter a recovery cycle.

　　 Cotton prices are expected to stabilize volatility

For the past 30 years from 1980 to 2010, the lowest and highest points of cotton prices were 30 cents / pound and 96 cents / pound in 1995, respectively. The main price fluctuation was basically at 50~90 cents / pound, while the relatively low 30~50 cents / pound low price region stagnated for a relatively short time, and the relatively high 90~100 cents / pound high price regional stagnation time also lasted for a long time. Therefore, 30 years of cotton price shocks can be divided into three intervals: high price area: 90~110 cents / pound; middle price area: 50~90 cents / pound; base price area: 30~50 cents / pound. In 2010, the market broke through the long-term shock interval of the United States cotton for decades. 80 cents ~186 cents became the limit of the US cotton index's last two years.

After this division, we can get a general understanding of the historical fluctuation of prices. First, the price in the future will fluctuate in the interval of 80 cents ~120 cents / pound. Even if there are several prominent intervals, it will soon return to the interval, which also creates a huge space for operation. And it can be seen that cotton is very resilient, and there are few cases of staying at a price or having too long concussion. Secondly, the price shock center is 100 cents / pound, the price has the biggest chance of repeated in this line, is an important watershed, breaking the pressure of 108 cents, brewing bull market; on the contrary, falling below 88 cents support, brewing bear market. Thirdly, the price in the middle price area is the longest and the period of stagnation is the longest. After breaking through the area, the price is quickly pulled back, so it can be regarded as a reasonable price fluctuation area. Fourth, prices are relatively short-lived between high prices and low prices. The high price of fifth, 150 cents / pound should still be the important ceiling price we remember, though the price exceeded that price for half a year. Similarly, the floor price of 60 cents / pound can not be said to be an attractive buying opportunity.

At present, the price of cotton in the United States has been at the top of the historical shock box, and has been rising sharply since 2010. Now the price has again touched the top of the box in the past one hundred years. From a historical point of view, cotton prices will be strongly supported here, instead of going back to 80 cents under long-term operation, even if the price falls below 80 cents, it will soon rebound. Therefore, from a historical point of view, the space and time for us cotton to drop here will be very limited. Once the US cotton has been stimulated by some factors and returned to the rally, it will usher in a more impressive price increase than domestic cotton prices. From April 2012 to July 2012, we should pay attention to it as an important time window.

Zhengzhou cotton has gone through a clear five wave structure since its fall of 33600 yuan / ton in November 10, 2010. CF1209 third the target of the wave fell also near the low of 19910.

　　 When the wave is over, cotton prices will pick up.

There are four waves of rebound. After September 2011, the shape of the zhengmian K-line formed the prototype of the large head and shoulders bottom, and formed the symmetrical bottom shape with the low point in October 20th. The volume of trading on the right has been significantly enlarged, and the trend of staged rebound is coming out. From the characteristics of the price cycle, the gradual uplift of the bottom has become an important trend. After finishing the finishing process, there will be more vigorous rebound in the market, and the brightness increase in September will reach 21800. The distribution range of the CF1209 period price shows that the area below 20000 yuan is the low price area, while the 20000~21800 yuan belongs to the middle price area, and the 19800 yuan will be a typical short trap. We believe that the support in the 20000 region is very strong. In the long run, the downside is not big enough. The price is bottoming out here, waiting for the four wave to rebound.

As the world's cotton production increased significantly in 2011, it is estimated that the world's cotton market will be oversupplied in 2012, and China's imports will further expand. At the same time, the reduction of cotton planting efficiency will result in a significant reduction in the global cotton planting area in 2012. China's import of large quantities of cotton will become an important factor leading to the rise of the international cotton price band.

On the whole, the cotton market in 2012 has a relatively high level in the first half of 3 and April, and it is more likely to show the trend of N font in the whole year. The turning point and abrupt factors of time and space will determine the operation time of investors; inventory consumption ratio and production and sales forecast data show that international cotton price is expected to stabilize and stabilize, and the international cotton price will fluctuate around 80~90 cents / pound; domestic cotton price will have the greatest probability of change in 19000~23000 yuan / ton interval, and will be affected by factors such as exchange rate policy and uncertainty of textile trade environment.