Cotton Prices Close To Purchase And Storage Prices

Closing to the reserve price is the main line of the market, which determines that the direction of investment is to hold more orders, while the overall commodity market warming will also help to raise cotton prices.

Short term risk events may bring temporary price pullbacks, which is a good opportunity for investors to bargain.

Level 328

Index has bottomed out since July 4th, and has rebounded slightly daily, with no drop in one day. It has risen to 18430 yuan / ton, and has risen 274 yuan / ton, but it is nearly 2000 yuan / ton less than the 20400 yuan / ton of national storage and purchase price in the current year.

At the same time, cotton futures prices also slowly picked up, the current main contract CF1301 stabilized at 19500 yuan / ton, less than the purchase price 900 yuan / ton.

From the perspective of 2011/2012, the current price return to the reserve price is a big probability event.

The "contradiction theory" in the cotton market

At present, the cotton market is facing a major contradiction, that is, the country is about to start buying and storing in early September, and the contradiction between supply and demand of cotton is relatively loose.

As far as the state is concerned, it is facing the situation of lower spot price and higher purchase and storage price.

Because the State implements unlimited price reserve policy, it will effectively protect the spot price from closing to the national reserve and storage price. The spot price trend during the implementation of 2011/2012's purchase and storage also proves this point.

During the seven months' acquisition and storage, the spot price of cotton and the price difference between the 328 level index and the storage price were not more than 800 yuan / ton, and the fluctuation interval of most of the price spreads ranged from 200 to 600 yuan / ton.

As for the loose supply and demand situation, it can be divided into two aspects: short term market supply structural stress and medium and long term supply structural surplus.

Owing to the large number of storage and purchase in 2011/2012, the high grade cotton that can be circulated in the market is less, and at the same time, it is limited by the quantity of import quotas. Although a large number of imported cotton is hoarding in the port, it can not enter the market circulation. At present, the domestic cotton market is in a tense situation of structural supply and demand.

In the near future, the policy of issuing quotas will ease the contradiction between supply and demand at this stage.

Spot prices are limited.

Due to the increase in global cotton production and the decline in economic growth in recent two years, the downstream demand has shrunk. Although cotton production will decline significantly in 2012/2013, cotton will continue to oversupply in the new year.

However, there is still a possibility of structural tightening in the domestic cotton market in the new year: first, because of the active storage and storage of domestic cotton enterprises, a large number of domestic high-quality cotton will enter the national reserve; two, if the new European debt problem is solved, the slow recovery of the US and China's economy will lead to the improvement of market confidence and the rise of downstream demand. Three, under the condition of quota restriction, the supply and demand structure of cotton is tight and the price may rise.

In short, the state is about to withdraw its stock, which determines that cotton prices will close to the reserve price.

With the implementation of the purchase and storage and the change of macroeconomic environment, the contradiction between loose supply in the medium and long term will be pformed into the main contradiction.

The possibility of market in the period of storage and purchase

Because the storage time is very long, the CF1301 contract will withdraw from the market, and CF1305 will become the main contract. Therefore, it is necessary to analyze different contracts.

During the CF1301 contract delivery period, the current arbitrage mechanism will effectively limit the price difference between the futures price and the purchase and storage price, and the fluctuation range of its price will fluctuate upward and downward with the reserve price as the axis.

CF1305 contracts are active outside the storage period, and the delivery period is between the two storage years.

Due to the current macro-economic outlook and the downturn in the downstream industries, the market has a strong atmosphere.

However, there are still more than three quarters of May 2013, there is greater uncertainty on the macro level, and the downstream industry has the possibility of improvement. Therefore, we should be cautious in selling short CF1301 contracts during the storage period.

Operation strategy

To sum up, closing to the reserve price is the main line of the market, which determines that the direction of investment is to hold more orders, and the overall commodity market warming will also help to raise cotton prices.

Short term risk events may bring temporary price pullbacks.

There are many opportunities for building a bargain.