The Oversupply Of Cotton Determines The Low Level Oscillation Of Cotton.

With the rebound of ICE cotton and the sharp rise of domestic and foreign agricultural products, the market weakness of Zheng cotton has rebounded recently. The main contract 1301 has been rebounded to close to 1000 yuan / ton from 18635 yuan / ton low point, but the turnover and position remain low. We believe that Zheng cotton market will maintain a weak oscillation pattern, with a heavy pressure of 20000 yuan / ton, but 19000 yuan / ton supporting is obvious.

　　 The oversupply of cotton determines the low level oscillation of cotton.

According to the US cotton planting intention report released at the end of June, the US cotton sown area was 76 million 758 thousand mu in 2012, a decrease of 14% compared with the same period last year, of which the sown area of Upland Cotton decreased by 14% compared with that of the previous year, and the planting area of Pima cotton was reduced by 24% compared to the same period last year. because U.S.A Cotton production was downgraded. In the USDA report released in July 11th, the end of July 11th cotton inventory fell sharply to 72 million 390 thousand packs, much less than the record 74 million 510 thousand package announced in June, which to some extent boosted the cotton price. However, this year's global cotton market is still oversupply, and the inventory consumption ratio is 66.45%. China's cotton ending inventory is estimated to be 31 million 800 thousand packs, accounting for nearly 44% of the world's total inventory. It is the loose fundamentals of the world and China that lead to the weakening of domestic and foreign cotton prices. The rise in the past month has lagged far behind that of soybeans, wheat and corn in the agricultural sector.

　 Purchasing intention of textile enterprises is not strong.

This year, European debt crisis And the continued appreciation of the RMB has a certain impact on the export of Chinese textile enterprises. June 2012, China Textiles and garments Exports amounted to US $22 billion 888 million, an increase of 4.83% over the same period, a decrease of 0.04% over the same period last year. Among them, exports of textiles (including textiles, yarns, fabrics and articles) amounted to US $8 billion 408 million, an increase of 0.59% over the same period last year. Exports of garments (including garments and accessories) were US $14 billion 480 million, a decrease of 0.41% over the same period last year. Because textile and garment export growth slowed down and cotton raw materials prices remained high, textile enterprises to buy cotton enthusiasm is not high, most of them used with mining, the average cotton inventory dropped to within 15 days. Domestic spot 328 level cotton is stabilized at 18500 - 18600 yuan / ton, Xinjiang cotton price is near 19000 yuan / ton. The CF1301 price is higher than the average spot price of 700 yuan / ton, which is attractive to the hedging business. The weak spot price restricts the further rebound of cotton futures.

　　 Huge spreads lead to large domestic imports.

Since February of this year, the spot price of cotton in China is 2000 - 5000 yuan / ton higher than that in the international market. Therefore, the annual import volume of cotton production has increased greatly, which has added to the weak domestic market. According to Chinese customs statistics, in 2012 1 - June, China imported 3 million 54 thousand and 700 tons of cotton, an increase of 1 million 728 thousand and 900 tons compared with the same period, an increase of 130.4%. However, due to the sharp fall in cotton prices, the default rate of premature contracts has risen sharply. According to the US cotton export report released in the latest month, the number of cancellations in the US cotton field in 2011/2012 has exceeded the new contract volume significantly, especially in June 11th to June 15th, when the net export volume was -13.66 million tons, of which China cancelled 136 thousand and 900 tons of contracts. China's large imports will support the international cotton market, but the high default rate will lead to the impeding of the international cotton price rise, which will affect the domestic cotton market and affect the enthusiasm of textile enterprises.

Although there are many negative factors in the domestic cotton market, the price of 2012/2013 is 20400 yuan / ton, and the whole agricultural product is rising because of the weather speculation, and the monetary environment is gradually loose. These profits will support the weak oscillation of domestic cotton futures prices between 19000 - 20000 yuan / ton.