Cotton Market Pressure Is Worrying

Market Review

In October, Zheng cotton The overall remain in the 19300-20000 interval of the shock, in the middle of the United States cotton by the newly listed cotton (19175,90.00,0.47%) quality worse than expected, the four consecutive trading day significantly increased and limit, while boosting the trend of Zheng cotton, the price reached the upper edge of the shock interval, but the price is approaching the shock interval, followed by the trend of the United States cotton trend down, Zheng cotton main 1301 contract back to 19500 yuan / ton around a narrow concussion, this month, the main funds began to gradually shift to 1305 contracts, as of October 29th, 1301 contract positions 169 thousand, up 85 points or 0.48% from the previous month, 1305 contract positions 148 thousand, increased by last month or more.

Two. Fundamental analysis

1. cotton Spot price trend

Figure 1, spot price at home and abroad

Source: Jinyou futures market research and Development Department

In October, the spot price of domestic cotton and outer cotton maintained a slight concussion, almost flat at the end of last month. As of October 29th, the domestic 328 level cotton price index was 18705 yuan / ton, a slight increase of 32 yuan / ton compared with the beginning of the month, and the import cotton price index FCIndexM1% tariff discount RMB 13729 yuan / ton, FCIndexM sliding tax discount RMB 14640 yuan / ton, which rose 16 points and 17 points respectively from the beginning of the month. At present, the price difference between imported cotton and domestic cotton is 4065 yuan / ton, which is 15 points higher than that at the beginning of the month. The price of imported cotton is still superior to that of domestic cotton. However, in view of the import quota and the support from domestic storage, the domestic cotton price keeps stable.

2. USDA forecasts cotton supply and demand.

Figure 2, global cotton supply and demand in China

Source: Jinyou futures market research and Development Department

According to the October global cotton supply and demand report released by the US Department of agriculture (USDA), the world's cotton production in October was 25 million 327 thousand tons, an increase of 501 thousand tons from the previous month, a consumption of 23 million 269 thousand tons, a reduction of 148 thousand tons, an end of 17 million 225 thousand tons of storage, an increase of 565 thousand tons, and an increase of 6.6 percentage points in inventories compared with 74.03%. In terms of output, the data of China, India, Brazil and the United States were mainly increased; in terms of consumption, China drastically reduced 436 thousand tons to 7 million 838 thousand tons, and China's imports fell 218 thousand tons to 2 million 395 thousand tons again; the end of the stock rose again, with China's terminal stocks 239 thousand tons, to 7 million 971 thousand tons, and the inventory consumption ratio of 101.5%, the first time over 100. Overall, USDA has been raising the global end inventory in recent months. The end of inventory will reach a record high. The situation of oversupply of cotton in the world is becoming more and more serious. In the short term, this report has raised the global inventory consumption ratio again in 2012/13 compared with last month, especially China's inventory consumption ratio has exceeded 100%, and the short-term impact is also empty.

3. Cotton imports

Fig. 3 cotton import situation

Source: Jinyou futures market research and Development Department

In September, China's cotton imports amounted to 262 thousand and 900 tons, an increase of 4.02% over the same period last year, and a decrease of 13.94%. In 1-9 months of 2012, China imported 4 million 30 thousand tons of cotton, an increase of 107.25% over the same period last year, 1.2 times the total import volume of last year. In September, the average import cotton accounted for 49.86% of the stock, down 2.03 percentage points from the previous month, and the proportion of imported cotton decreased for third consecutive months.

Due to the gradual consumption of import quotas issued earlier, and the NDRC has made it clear that the import quota will no longer be issued later this year, the volume of cotton imports in the fourth quarter will be gradually reduced and the pressure on domestic cotton prices will be eased. {page_break}

4. Cotton production and production

According to the US Department of agriculture report, by the week October 21st, the new boll rate of new cotton in the United States was 94%, slightly lower than the same period last year, higher than the five year average level; the harvest rate was 38%, slightly slower than the same period last year and the five year average level; the excellent and good rate was 42%, maintaining a steady trend. As a whole, new cotton has been on the market. As a whole, cotton cotton has experienced severe drought during the bud stage this year. It has a certain effect on cotton growth. The overall excellent and good rate is lower than the normal year. But because of the drought in the United States last year than in this year, the cotton flower growth in the United States is better than that in the previous year. It is estimated that the output of this year is 3 million 725 thousand tons, up 9.9% from last year.

Since October, the weather has been fine in most cotton regions of the country, which is conducive to cotton bolting and harvesting, and cotton picking progress has accelerated significantly.

According to the estimated output and the number of harvested cotton farmers surveyed, as of October 15th, the national cotton picking rate was 73.9%, an increase of 16.7 percentage points over the same period, an increase of 54 percentage points, including 64.8% of the Yangtze River Basin, an increase of 13.5 percentage points over the same period of the previous year, 80.2% percentage points in the the Yellow River River Basin and 15 percentage points in the same period; 73% in Xinjiang cotton area, an increase of 19.3 percentage points over the same period last year.

The national cotton sales progress was 44%, an increase of 26.4 percentage points over the same period, an increase of 38.6 percentage points. Affected by the fall in cottonseed prices, the cotton seed sale price of cotton farmers has dropped. In the first half of October, the average selling price of cotton farmers was 7.98 yuan / kg, down 0.07 yuan / kg, down 3.3% from the same period last year.

5. Inventory situation

Figure 4, cotton inventory chart

Source: Jinyou futures market research and Development Department

According to the statistics of China cotton information network, as of the end of September 2012, the total domestic cotton business inventories totaled 1 million 470 thousand tons (including cotton and cotton entering the circulation link, excluding national cotton reserves), an increase of 240 thousand tons from the end of last month, an increase of 83% compared with the same period last year, of which the proportion of foreign cotton accounts for 49.86%. September Spin The stock of cotton in the warehouse was 794 thousand and 500 tons, an increase of 20 thousand and 600 tons from last month, an increase of 9.97% over the same period last year. Mainly due to the newly increased processing trade quotas in the early stage, the textile mills must be used in the end of the year, and the state's purchasing and storage policy is supported. The cotton prices in the spot market have stabilized, and the textile enterprises have increased the volume of cotton purchase. However, in view of the weak demand of the terminal, the purchasing of textile enterprises remains rational and the inventory is cautiously increased. In terms of finished products, the trade picked up during the traditional peak season of textile consumption, especially in the grey fabric market, with the recent increase in the production of textile enterprises and the elimination of inventory, which led to a decline in the yarn and grey stock of textile enterprises in September. The survey showed that yarn inventory was 23.06 days, 0.3 days from last month, 25.71 days for grey fabric, 2.78 days from last month. Overall, although the finished product inventory pressure of textile enterprises has been alleviated somewhat earlier, it is still at a high level and is concerned about whether the stock pressure can continue to decline in the future.

6, cotton yarn staple price trend

Figure 5, cotton yarn and polyester short price chart

Source: Jinyou futures market research and Development Department

In October, affected by the stabilization of raw material prices, the trend of cotton yarn overall maintained a steady upward trend. However, foreign demand was insufficient, orders were still relatively small, and the situation of producing more than sales remained unchanged, and the overall turnover of cotton yarn market was not good. Affected by the fall in crude oil prices, the trend of polyester and short prices is relatively weak. As of October 26th, cotton yarn JC40S price was 30820 yuan / ton, cotton yarn KC32S price was 25550 yuan / ton, compared with the beginning of the month, it rose by 150 yuan / ton, polyester staple fiber price was 10720 yuan / ton, down 280 yuan / ton from last month, viscose staple fiber price was 14200 yuan / ton, down 600 yuan / ton from last month. {page_break}

7. Sales situation of downstream textile enterprises

Figure 6, yarn monthly import textiles clothing Total export volume

Source: Jinyou futures market research and Development Department

The import of cotton was restricted by the quota quota, and the spinning enterprises turned to the direct import of low price cotton yarn, and the yarn imports remained at a high level in September. In September, 137 thousand and 600 tons of cotton yarn imported, an increase of 62.7% over the same period, a decrease of 9.23% in the ring ratio. In 2012, China imported 1 million 87 thousand and 300 tons of cotton yarn in 1-9 months, an increase of 74% over the same period last year. In September, China's textile and clothing export data recovered, with a total value of US $25 billion 100 million, an increase of 9.22% over the same period last year. In 2012, 2012, the total value of textile and clothing exports totaled US $187 billion 100 million, up 0.52% over the same period last year. The improvement in the data this month is mainly due to the boost of textile consumption peak season, and it remains to be seen whether the export data will continue to improve in the future.

From the domestic market situation, according to the statistics from the China National Business Information Center for hundreds of major retail enterprises nationwide, the retail sales of clothing commodities increased by 10.62% over the same period last September, and the growth rate slowed down by more than 10 percentage points over the same period last year, down 6.1 percentage points from the previous month, indicating that domestic demand is once again weakening and the future situation is still grim in the 2012.

8. National policy

Storage and purchase, the first time since September 13th the transaction, with the new cotton large number of listing, storage and purchase volume gradually enlarged. As of October 26th, 2012 cotton temporary storage and storage totaled 1 million 632 thousand tons, and Xinjiang accumulated 1 million 210 thousand tons of tonnes. The total volume of transactions in the mainland reached 422 thousand tons. The progress of storage and storage was substantially faster than that of the same period last year. Due to the absolute superiority of the reserve price, most of the new cotton will be sent into the Treasury this year. At this rate, it is estimated that by March 2013, the storage will end up to about 5 million tons. However, considering the limited storage capacity, the latter countries may limit the daily planned storage capacity to reduce storage and storage. If so, such a large number of national cotton reserves will be hidden in the future supply of cotton market, and it is expected that it will be carried out or normalized in the future.

Four, technical aspect analysis

Technically, the Zheng cotton index is still around 19500. The price is running near the middle track of the brin channel. From the daily line level, the MACD index is glued to the zero axis, the KD index trend is downward, and the technical form is weak in the short term. From the weekly chart, the price is running below the double bottom neckline and has not yet been effectively broken. The direction is still unclear, and the index is expected to oscillate in the 19000-20000 interval in the near future.

Summary of views and suggestions for operation

On the whole, the main trend of the cotton market at present is collecting and storing. The absolute advantage of the purchase and storage price leads to the majority of new cotton coming into the national reserve. This year's expected reserves are expected to exceed that of last year. Inventory consumption than the first break of 100 also indicates that the 12/13 cotton market supply easing pattern is very grim, cotton prices will be under pressure in the future. However, due to the support of the purchase and storage price during the storage period, the cotton price downward space is limited. In addition, the purchase and storage will end in March 2013, and support for the 1305 contract is weak. It is expected that the 1305 contract will have a lower probability of concussion. The future concerns whether textile and clothing sales data can continue to improve.

Operation proposal, Zheng cotton 1301 contract in the concussion interval 19300-20000 high throwing low to absorb; 1305 contract midline maintains high the short selling mentality operation, supports 19000, the pressure 19800.