Severe Oversupply Leads To Weak Cotton.

First, the market review: narrow shocks, policy led City

In October, cotton (19220,55.00,0.29%) was characterized by a narrow range of shocks, and 20400 of the purchase and storage price provided support for domestic cotton prices. However, the serious oversupply situation still kept the cotton market under heavy pressure.

At the same time, the international cotton market is worried that the cotton pickled cotton in the southeastern part of the United States will have a higher level of "equine value".

In the textile process, the crude fiber breaks, and then rises and down, and fluctuates violently. At present, this incident is only a partial problem.

In October, the 1301 contract of zhengmian main force was narrowly concussion, closing at 19525 yuan / ton, closing price rose 120 yuan / ton, or 0.62%, the monthly line reported to take the shade line of the shadow line, and the position reduced to 167 thousand hands.

Two, focusing on general elections at home and abroad, the macro economy and commodity markets.

The most significant political event in November is the November 6th General Election and the eighteen largest Chinese Conference in November 6th.

In the first ten days of November, the rebound of the US dollar may bring bad profits to the commodity market. But in the long run, the introduction of the new deal will surely give the world economy a strong heart to help stabilize the economy and bring more benefits to the commodity market.

Combined with the cotton variety itself, because the correlation is not too high, the effect will not be too great.

(1) oversupply of cotton at home and abroad

In October, the USDA supply and demand report raised the output of global cotton to 116 million 320 thousand bales, while consumption was reduced to 106 million 870 thousand packages, so the final inventory was further refreshed to a record high of 79 million 110 thousand packs.

Global cotton inventories have been rising since May 2011, which is nearly double that of 2010/11.

The increase in output is far below the level of stock increase. Obviously, the increase in production is not the cause of serious oversupply, and the reduction in consumption is the main reason for the oversupply of cotton at present.

According to the October USDA supply and demand report, China's surplus situation is even more serious.

At present, domestic inventories reach 36 million 610 thousand packs, an increase of 245% compared to 106 thousand packages in 2010/11.

Consumption in the same period decreased by 22%.

In the year of 2012/13, the domestic cotton consumption ratio reached 101.69%, and the average of twelve years since 2000 is 37%. Now it is 2.7 times the historical mean, and the excess pressure can be imagined.

We can see that both domestic cotton and global cotton, the current inventory consumption ratio is the highest level in more than ten years, and the serious surplus of supply restraining cotton prices.

(two) excessive internal and external spreads cause imports to remain high.

According to C32S cotton yarn index 25600 yuan / ton, CCI 328B index 18721 yuan / ton calculation, as of November 2nd, textile enterprises are in the break even line.

However, according to the import of 14490 yuan / ton of imported cotton, the profit of textile enterprises can reach 4661 yuan / ton, and the purchase of cotton for the corresponding price of Zheng cotton contract in November will cost 465 yuan / ton for spinning, so Zheng cotton is still less competitive than imported cotton.

According to customs statistics, China imported 26.29 tons of cotton in September, the highest level in history. For China, imported cotton is an important reason for oversupply. However, the disparity between domestic and foreign cotton prices is the most profound reason.

Because the state departments concerned said that imported cotton would not issue quotas later this year, the supply and demand situation will be determined again next year, which will play a certain role in psychological support. But in fact, imported cotton can be replaced by imported cotton yarn, and imported cotton yarn has no quota.

In September, China imported 137 thousand and 800 tons of cotton yarn and hit a new high. The substitution of imported cotton yarn has become a new trend. The weakness of domestic cotton market is difficult to change.

(three) support for purchasing and storage policy

The cotton purchase and storage policy in 12/13 is 20400 yuan / ton, which is open and closed. The implementation time is from September 1, 2012 to March 31, 2013.

On September 18th, Zhang Xianbin, head of the State Economic and Trade Commission of the national development and Reform Commission, said at the 2012 national cotton situation analysis conference held by the China Cotton Association that the temporary purchase and storage policy will be carried out unshakable and put aside for sale in September 29th.

Policy support in the short term has played a certain role in maintaining stability. But in the long run, the situation of oversupply and light consumption has not changed, and the substitution effect of imported cotton yarn and chemical fiber yarn will always exist. The counter cyclical regulation of policy will not change the general trend.

(four) downstream consumption is still not optimistic.

With the slowdown of global economic growth and the European debt crisis, the textile industry has been spinning since the two quarter of 2102.

Exports showed a downward trend.

With the external economy gradually stabilized, China's exports exceeded expectations in September, and textile exports grew by 0.54% in 1-9 months.

Despite reversing the four months of decline, sustainability remains to be seen.

The slow recovery of domestic economy also restricts the growth of the textile industry.

In the context of the downturn in domestic and foreign demand, the domestic textile industry has been suffering from high cost, sluggish sales, profit compression, and stop production and production.

The order situation of textile enterprises is still not optimistic. The inventory of downstream garment companies remains high, and textile demand is still not showing signs of improvement. Meanwhile, the price drop of cotton by-products has led to downward pressure on cotton prices.

The spot market continues to slump, and the lint market is not selling well.

At present, the sale of cotton enterprises is mainly based on storage and storage. Due to a slight reduction in the purchase price of seed cotton, the direct production cost of lint is nearly 20000 yuan / ton in the new year, which is sold in accordance with the purchase and storage price, and a slight surplus in production and operation. However, due to the fact that the overall market expectation is not optimistic, most enterprises feel the pressure of late stage is greater.

As of October 31st, China's cotton price index was 18709. In October, it was picked up and picked up.

Judging from the inventory of Zheng Shang, as of October 31st, 830 stocks in Zhengshang were in stock, and the warehouse receipts continued to decrease at the end of May to support the rebound pattern, and the bears should be cautious.

According to the CFTC report, by the end of October 30th, the US cotton's non commercial position was reduced to 104 hands, and the market outlook supported the shock pattern.

According to the positions held by the top 20 members, the position was mainly in October, but the net space showed a significant decrease. As of November 9th, the net position was -10435, supporting the short cut pattern.

Five. Technical analysis

The long term trend of the US cotton 12 contract has broken through the downward path since the high point in June 2011, and the central line has moved to a broad range of 64-80 cents. The initial low point of 70 in early October has changed from support to pressure level, and the previous low point of 64.61 cents has strong support.

Indicators, the EMA is still in short order, the short term average line is diverging, the long term index MACD positive energy becomes smaller, the difference between DIFF and DEA is smaller, and there are signs of downward shock.

From the point of view of volume and price, referring to the US cotton index, the volume of short-term turnover has been enlarged and the number of positions has been reduced.

Therefore, we believe that the US cotton will be down in November.

Zheng cotton changed from month to 05 this month. The long-term trend has been in a downward trend since the high point in February 2012. The midline trend is 18300-20000 wide shocks. The recent pressure level is near 19300, and the previous low 18300 has strong support.

Indicators, the average system is short, the long term index MACD positive energy becomes smaller, DIFF and DEA are trying to kill.

From the point of view of volume and price, referring to the Zheng cotton index, the recent turnover volume and position are smaller, only supporting the shock market.

Therefore, we believe that Zheng cotton will remain weak in November.

Six, outlook for the future

To sum up, focusing on general elections at home and abroad, the macro economy is more profitable than commodity markets.

Basically, domestic and foreign oversupply is serious. Domestic cotton consumption has exceeded 100%. Excessive internal and external spreads cause imports to remain high. Although the purchasing and storage policy provides support, downstream consumption is still not optimistic, and funds and technology support the weak pattern.

In November, or will remain weak, operational strategy proposed empty single hold, reference stop loss 19400 yuan / ton, continue to maintain the idea of selling short.