Why Is The Cotton Market "Uneasy"?

Here world clothing shoes The Xiaobian of the hat net introduced cotton price to "another city", and the cotton market anxiety deepened.

Entering the July, Zheng cotton market suddenly changed. In just 9 trading days, the price of the main contract fell more than 1000 points, and the implementation rules for the cotton target price subsidy that all of us looked forward to were still not released. The whole cotton market was enveloped in the "restless" mood.

At the moment, cotton topping is in full swing, less than a month away from the new cotton year. Time is no longer waiting. When the new cotton is about to go on sale in September, when will the direct subsidy rule be announced? Is it subsidized or subsidized by area? If cotton prices continue to fall, the price gap between the direct subsidy target and the 19800 yuan / ton price is too large, will there be a cap on financial subsidies? If the domestic cotton price is lower than the outer cotton, do we need to provide a bottom line, who will provide the bottom and how to provide the bottom? These problems are haunting people's hearts.

The industry appealed for the straighten out rules as soon as possible, so as to give the market a stable expectation, and let the participants of cotton related industrial chain have time to plan the next cotton business strategy. According to the China Securities Journal reporter, at present, the Interim Measures for the use and management of subsidy funds for cotton target price reform in the Xinjiang Uygur Autonomous Region have been submitted for trial. The target price subsidies are expected to be subsidized according to the actual planting area of cotton and the quantity of seed cotton sold. In late July, the 8 ministries and commissions of the state will publish the detailed rules for the subsidy after examination and approval, and will be implemented in September.

　 Cotton price mechanism returns to market

Recently, Zheng cotton fell and sparked market concern. In from July 1st to 11th, Zheng cotton 1501 contract continued to increase the warehouse volume, fell from 15370 yuan / ton below 15000 yuan / ton integer pass, continued to explore to 14230 yuan / ton, the cumulative decline of up to 7.66%, 9 trading days only two days of red, which has been relatively rare in the past two years.

There are two main reasons for the fall in cotton prices: first, the impact of the US cotton yield increase, the rapid downlink, the loss of support for the inner cotton; two, the new cotton year, the state will purchase and store the direct subsidy, and the cotton is facing the market pricing environment. Huang Shanghai, Changjiang futures, said that due to the reduction of cotton consumption in China and huge inventory of state reserves, the imbalance between supply and demand led to a marked downward trend in market prices. Logically, the current downward trend is more reasonable.

Public data show that as the world's largest cotton supplier, the US cotton may increase its planting area, increase its output and increase its final inventory. The pessimism of the market has made the Intercontinental Exchange (ICE) cotton price fall by 15% in the past month, which is regarded as the fuse of the recent domestic cotton price drop in December.

At the same time, since the beginning of this year, the pace of reform of China's price system has been quickened. The original cotton purchasing and storage system has been replaced by direct subsidy policy. The direct support from policy to the market is no longer, and the market leading force is coming back. The huge inventory of state cotton stocks has great pressure on the spot price of cotton.

"In the past three years, the total amount of cotton storage and storage has exceeded 16 million tons. At present, the reserve cotton in the Treasury is still about 12 million tons, and our country will produce about 6 million tons of cotton annually. It takes nearly 10 million years to digest cotton at most per year, and it takes nearly three years for the national treasury to basically digest the cotton. Xia Ting, a business analyst.

From the perspective of demand, traditional Spin The industry has entered the consumption off-season, and the relevant rules of cotton direct subsidy have not yet been promulgated. Textile production enterprises have taken a cautious attitude towards orders. When purchasing raw materials, they are all used with purchase, cotton yarn sales are sluggish and inventory backlog is serious.

The sluggish spot market is fully reflected in the rapid fall in prices. In 2011 -2013, the state implemented the cotton purchase and storage policy. The price of cotton purchase and storage increased from 19800 yuan / ton to 20400 yuan / ton, but the international cotton price went down all the way. In 2013, the difference between home and abroad reached 4420 yuan / ton. By the middle of July, the price of Xinjiang cotton of grade 4128 and grade 3128 was 15700-16600 yuan / ton and 16500-17200 yuan / ton respectively.

"Return to the market, we must respect the market price law." Hou Dipeng, chairman of Qingdao Zhong Xu International Logistics Co., Ltd., told reporters that the purchase and storage system has support for domestic and foreign prices. Now, the abolition of the purchase and storage in China is directly reflected in the normal return of the price.

With the gradual weakening of policy factors, domestic cotton prices continued to fall, and the price difference between domestic and foreign cotton prices dropped to around 1600 yuan / ton. Insiders pointed out that this just reflects the beginning of domestic cotton prices docking with the international market.

As for the direct subsidy policy, the industry believes that the goal of direct subsidy policy is to reduce administrative intervention, so that prices can better reflect the market supply and demand relationship. Therefore, before and after the promulgation of policies, the market sentiment may be affected, but the main factor that affects cotton prices is the relationship between supply and demand.

In the view of Fu Xiaoyan, an analyst at Nanhua futures company, the oversupply of cotton in the world is still to be digested. The implementation of China's policy of purchasing and storing direct subsidy will gradually solve the problem of China's cotton market. China's demand is expected to decline in recent years, and the international cotton price loses the core of "demand power" and is expected to maintain a weak state.

　 Appeal for direct subsidy rules as soon as possible

Although the target price subsidy policy has been promulgated for a long time, the target price of 19800 yuan / ton has been established for a long time, but the specific rules have not yet arrived. Because of the rumors of uncertainty caused by various rumors in the market, the discontinuity of cotton policy in the post purchase and storage era also makes the market wait-and-see sentiment more and more concentrated.

"At this stage, cotton prices have been going down, and the more we fall, the more we make up. The market rumors are 3800 yuan / ton is the upper limit of subsidies. If we exceed what we do, there is no bottom price in the low price. If there is a bottom price, who will be entrusted to it and how to do it, there is no further explanation." Zhang Wenmin, general manager of Wanda futures cotton industry division, said.

Hualian futures related researchers believe that if cotton prices fall too low, and the price gap between direct subsidy target and 19800 yuan / ton is too large, the state will not afford huge losses or make direct subsidy policy counterproductive.

Yu Lijuan, a senior analyst at Jinshi futures cotton, believes that since the implementation of the cotton direct subsidy pilot policy, the financial burden problem will not stop. In contrast, direct subsidy has a more direct effect on the domestic cotton farmers' income and no increase in costs for downstream manufacturers and consumers.

According to Chen Xiaoyan, a galaxy futures researcher, it is estimated that the direct subsidy will be about 20 billion yuan at the current monthly price and Xinjiang production by 4 million 500 thousand tons.

She pointed out that at present, the industry's attention to the direct subsidy policy is mainly focused on three points. One is how to determine the "market price" of the direct subsidy, and who will decide to ensure that the subsidy is open, fair and fair. Two, whether the cotton direct subsidy policy in Xinjiang will be extended to the mainland, how to protect the interests of the cotton farmers in the mainland, and the three is whether there are other measures to stabilize or support cotton prices if the market is "difficult to buy cotton" or when cotton prices are "panic".

Only a month away from the new cotton year, the industry expects that the direct subsidy rules will be introduced soon. Chen Xiaoyan told reporters that at present, Xinjiang has formulated the Interim Measures for the management of the Xinjiang Uygur Autonomous Region cotton target price reform pilot subsidy fund, but only for the draft. The final rules need further approval from the relevant departments before it can be confirmed.

The reporter learned from an insider that the executive rules on target price subsidies formulated by Xinjiang were not reviewed. The main content of the cotton direct subsidy pilot scheme is that when the cotton market price is lower than the target price of 19800 yuan, the state will subsidize the two party price difference to the cotton producers; the cotton target price will be certain for a year, the state will formulate the target price of the lint cotton, the Xinjiang government announced the target price of seed cotton, the target price of cotton will be 19800 yuan in 2014, the temporary purchase and storage policy will be abolished, and the mainland's quota subsidy will be 2000 yuan.

The plan also shows that the subsidy method for cotton target price is that the subsidy funds are paid in 2 times, of which 60% of the subsidy funds are paid in advance before the cotton sale period in September, and the remaining 40% subsidy funds are paid according to the actual cotton sale volume in February next year. In the specific subsidies, the implementation of cotton warehousing, sampling, public inspection and one card system will gradually implement the Xinjiang cotton green card system and comprehensive cotton support policy: after the State implements the target price subsidy, it will continue to give support to Xinjiang's cotton base construction, water-saving irrigation, machine cotton picking equipment, cotton good seed subsidy, cotton cotton yarn and cotton cloth freight subsidy.

"It is expected that July will soon come out, because there are a series of related links that need to be prepared and the workload is heavy. This will take time, and cotton will be on sale in September. Before the listing of new cotton, cotton farmers, ginning plants and textile enterprises should have corresponding consideration and preparation. Zhang Wenmin believes that the introduction of the Xinjiang direct subsidy rules will give answers to some of the larger differences. It is suggested that the relevant enterprises pay close attention to the detailed rules of the national cotton purchase and storage policy adjustment plan and formulate the operational countermeasures to deal with market risks.

{page_break}

Reactivating futures market function

Before the temporary purchase and storage started, cotton futures were widely used as pricing tools, arbitrage, hedging and financing tools for traders and enterprises. In 2011, after the implementation of the temporary cotton purchase and storage policy, 90% of spot cotton resources entered the treasury system through storage and purchase, resulting in limited cotton resources available for futures delivery on the market, and cotton futures trading shrank.

According to Zhengshang statistics, from 2011 to 2013, the cumulative turnover of cotton No. 1 dropped from 278 million hands to 42 million 67 thousand and 300 hands, down 84.87% and 64.57% from the same period last year. The cumulative turnover decreased from 36 trillion and 259 billion 459 million yuan and 4 trillion and 188 billion 861 million yuan to 1 trillion and 481 billion 316 million yuan, respectively, which decreased by 88.45% and 64.64% compared with the same period last year. At the end of the year, the number of holdings increased from 133 thousand and 100 hand to hand to hand at the end of 2013.

After "direct subsidy", cotton prices will revert to the market, and futures warehouse receipts will not be short of storage and purchase. Cotton futures will be heavily used by cotton companies as a tool to detect prices and evade risks. Cotton futures will revive and the futures market will continue to play an important role. " Chen Xiaoyan said.

Since April this year, cotton contract activity has been significantly enlarged under the expectation of direct subsidy policy. The number of cotton holdings rose rapidly, from 109 thousand and 300 at the end of 4 to 5 at the end of 5, and 123 thousand and 700 at the end of 6. As of July 11th, the position was further enlarged to 156 thousand.

"It can be predicted that when cotton starts to go on sale in 9 and October this year, cotton enterprises will pay more attention to the futures market. Referring to the futures market price, the price of cotton seed cotton will be sold out and the seed cotton will be sold in bulk in the futures market in a timely manner. Only in this way can he avoid the risk of falling prices in the cotton market." Zhang Wenmin said.

It is reported that some traders have used futures hedging to sell the cotton that is still in the new year to the textile enterprises. The risk has been locked ahead of schedule. Zhang Wenmin told reporters, "some forward-looking experts are already doing some pre hedging on futures, the results are very good, from the beginning of the 17000 yuan / ton fell to the current 15000 yuan / ton below, some people's yield reached 30%-40%."

According to the insiders, while using the target price policy to protect the interests of the top growers, we should also develop the agricultural insurance (security assured) market vigorously, develop large-scale cotton planting specialized households, cooperatives and farms, seriously cultivate the trading platform for agricultural futures and options market, and encourage the market participants to take the initiative to take advantage of these market means to avoid risks and enhance the ability to resist risks, so as to achieve the best implementation effect of the policy.

Reporters recently learned that, in order to further promote the development of the cotton futures market, Zheng Shang is actively developing cotton textile, raw silk and other textile industry chain futures varieties, improve the cotton textile industry chain system, better serve policy reform, and provide better futures services for the real economy.

along with Cotton market With the gradual opening up, the operational risks of cotton enterprises are increasing. It is urgent to participate in the cotton futures market. Zhang Wenmin suggested that the relevant enterprises should take the combination of futures operation and risk control methods and take part in the operation of cotton futures warehouse cotton, spot cotton hedging, futures cotton futures and cotton futures, and according to the annual business plan of textile enterprises, in accordance with the "cost plus cost plus profit" method of balancing the base price transaction standard, the cotton price, quality, quantity, loan funds, warehousing and transportation, and the market price trend will be predicted in a phased and proportionate way. The quantity, amount, month, basis, trading direction, ladder price ratio, and band optimization of the basic price band of large cotton cotton yarn futures market will be determined.