China's 3 Year Cotton Open Purchase And Storage Policy Is Expected To Usher In A Major Adjustment.

Concerned about the trend of cotton market in the first half of 2013, we have to pay attention to the "cotton problem". In the past two years, the Khmer price difference has troubled the daily production of enterprises, the competitiveness of cotton products has been reduced, the stock of cotton reserves and financial pressure are huge, and the "cotton knot" woven by the problems of cotton planting area and quality decline has become the downstream cotton spinning and even the whole. Spin Industry needs to be solved urgently. According to information from all sides, the open cotton purchase and storage policy of our country which has lasted for 3 years is expected to usher in a major adjustment.

Market review: small and medium upward oscillation

Data show that in 1~3 months, domestic cotton prices rose from 19200 yuan / ton at the beginning of the year to 19350 yuan / ton to 19400 yuan / ton, and only 150 yuan / ton to 200 yuan / ton in 3 months. By 20400 yuan / ton unlimited storage support, and since mid January, the state began to auction cotton reserves at the basic price of 19000 yuan / ton, making the overall price of cotton in the influence of purchasing and storage support and low price dumping, showing a slightly stronger trend in stability.

After entering the April, the state ended the purchase and storage, and the high support price disappeared. Thereafter, domestic cotton prices steadily weakened slightly, and the price dropped to 19300 yuan / ton, or only 50 yuan / ton to 100 yuan / ton. With the increasing reserves, the national cotton store auction basically occupied the lead, plus the 3: 1 import cotton quota distribution, the overall circulation increased. Domestic cotton spot price fluctuates between 19200 yuan / ton and 19400 yuan / ton. At the beginning of this year, the price of the 328 grade cotton was around 19200 yuan / ton, reaching the highest level in the early April at 19390 yuan / ton, reaching the lowest level in the end of June at around 19300 yuan / ton. The overall maximum fluctuation is only 200 yuan / ton. International cotton prices are relatively strong, the highest to 99 cents / pound.

Sowing area showed an overall downward trend.

Although the implementation of the purchase and storage policy is to protect the interests of cotton farmers, it has not changed the trend of overall decline in cotton planting area in China. This year, cotton planting area has dropped to below 467 thousand sq km for the first time. The data of China Cotton Association is 456 thousand sq km, which is 6.7% lower than that of last year. The National Bureau of statistics of China is 440 thousand square kilometers. Specifically, this year's Xinjiang production and construction corps cotton sown area reached 59 thousand square kilometers, an increase of 7.1% over the same period last year. In addition, the enthusiasm of cotton growers in the the Yellow River River Basin has been weakened, and the industrial land in the Yangtze River Basin has gradually occupied the farmland. The overall planting area of cotton has declined, with a decrease of 8.2%.

Why does the cotton growing area of the Xinjiang production and Construction Corps increase and other areas decrease? The increase in cotton planting area of the Xinjiang production and Construction Corps is mainly due to the implementation of the State purchasing and storage policy, and the sales of Xinjiang's corps are mainly stored and stored.

However, from the whole country, the willingness of cotton growers to grow cotton is decreasing. The global economy is weak, the cotton textile enterprises have difficulty in operation, the supply of cotton is oversupplied, the spot sale of lint is light, and the number of national cotton reserves is increasing. Farmers have no confidence in the fact that the country will continue to receive large quantities of storage in 2013. Moreover, the cost of cotton planting has risen sharply. Although the price of cotton purchase and storage has increased in 2012, it still can not keep up with the increase in agricultural and labor costs. In addition, the prices of other agricultural products such as corn and soybeans rose sharply, the price fluctuation was small, the income was stable, the management was simple, and the cost of labor was low, which had great attraction for cotton farming tools. Recently, some industry forecasters predict that the output of cotton will be reduced by 5% this year, mainly because farmers are replanting higher priced cereals. The US Department of agriculture forecast output to be reduced by 1.7%.

Inventories are at a low level.

According to the cotton warehouse branch of the China Cotton Association, the monitoring of 154 cotton specialized warehouses in 18 provinces and autonomous regions showed that as of the end of May, the total turnover of commodity cotton turnover was 287 thousand tons, an increase of 6 thousand tons, an increase of 856 thousand tons compared with that of the previous year, of which Xinjiang cotton accounted for 33%, real estate cotton accounted for 11%, and imported cotton accounted for 56%.

Compared with previous years, the overall inventory of cotton this year is obviously lower than in previous years. In the first 3 years, the overall social turnover inventory was maintained at 1 million 500 thousand tons to 2 million tons, and in May this year it was below 500 thousand tons. Especially in Xinjiang, the overall inventory this year is significantly lower than the previous two years. By the end of May, the turnover of 23 cotton warehousing cotton stores in Xinjiang was only 9 thousand tons, an increase of 1 thousand tons, a decrease of 362 thousand tons compared with the same period last year. The total number of Xinjiang cotton is 95%.

In contrast to the trend of monthly cotton inventory in recent years, due to the support of unlimited purchasing and storage policy this year, the stock market has shifted to the reserve, resulting in a low turnover in the overall market.

Import and export year-on-year decrease of 21%

Statistics show that in 1~6 months of this year, China imported 2 million 411 thousand and 600 tons of cotton, a decrease of 641 thousand and 600 tons compared with that of the previous year, a decrease of 21%. From the point of view of the country of origin of cotton imports, the three leading countries of China's imports this year are India, the United States and Uzbekistan.

Why is the volume of imported cotton going down sharply? At present, China's cotton textile industry has a high inventory level under the condition of weak textile consumption in the lower reaches of the world. At the same time, domestic and foreign cotton prices upside down "bread flour price higher than bread", cotton textile enterprises to import cotton yarn and reduce imports of cotton. In addition, some cotton spinning enterprises take the initiative to reduce the amount of cotton, increase the amount of chemical fiber, and change to the blended yarn.

In addition, since June, according to the needs of cotton enterprises, the relevant departments of the state have moderately increased the number of warehouses sold outside the reserve in 2011, and the advantages in terms of price and quality have attracted the popularity of cotton in the national reserve, while the bonded cotton and the sailing cotton are at a competitive disadvantage.

Policy: balancing the interests of the industrial chain

The relevant government departments have indicated that they are considering adjusting the current cotton open storage and storage policy, and the research on cotton farmers and cotton enterprises has also begun. The new policy will be implemented next year.

The temporary purchase and storage policy was introduced to deal with the sharp rise and fall of cotton prices in the international market and played a very important role in protecting China's cotton industry. However, the policy of temporary purchase and storage is not obvious, and it affects the development of cotton textile enterprises. How to protect the interests of cotton farmers and achieve a win-win situation in cotton and cotton textile industry chain has become a major consideration in the formulation of policies.

On the one hand, the temporary purchase and storage policy has a protective effect on the domestic cotton industry to a certain extent. Once the domestic market is lifted and the international low price cotton is pouring in, the cotton industry may face the dilemma of China's soybean and the whole industry will be affected. If the cotton planting area has shrunk so much, it will be hard to recover. Therefore, the temporary purchasing and storage policy has set up an umbrella for the whole industrial chain. Moreover, the current cotton textile enterprises bear the pressure brought about by the larger price difference between domestic and foreign cotton. If the policy of temporary purchase and storage is substantially adjusted in the current international market downturn, cotton prices may fluctuate greatly. Cotton textile enterprises will face an unstable market, and the risks and pressures may be greater.

At the same time, the protection of China's cotton industry will objectively play a positive role in stabilizing the international cotton market, because China is the largest cotton producing country and cotton consuming country in the world. China's cotton industry can develop steadily under the relevant policy function and has positive significance for the world's cotton industry.

On the other hand, on the other hand, the actual situation is that the temporary purchasing and storage policy based on protecting the interests of cotton farmers in China and protecting the cotton industry has not really promoted the farmers' willingness to grow. Moreover, because of the policy of national cotton purchasing and storage, the market price and the incentive function of competition have been greatly weakened. The cotton farmers in China are generally not heavily weighed in the planting process, and the investment in cotton seed cultivation and planting technology upgrading is also seriously inadequate.

The current purchasing and storage policy and the establishment of the purchase and storage price are obviously inclined to support the upstream industry chain, and the interests of downstream textile enterprises have been affected, which is not conducive to the development of the whole cotton spinning industry in China. Moreover, this abnormal administrative intervention has resulted in excessive inventory, but also caused the embarrassment of no cotton and delivery in the futures market, the disconnection between the purchase price and the market price and the restriction of the futures delivery channel, which also posed a hidden danger to the financial market.