Analysis Of The Influence Of China'S Xinjiang Direct Subsidy Policy On ICE Futures

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The Xiaobian of the network gives you an introduction to the influence of China Xinjiang direct subsidy policy on ICE futures.

Judging from various signs, the "direct subsidy" scheme for the Xinjiang cotton growing area in 2014 will be more likely to be announced before and after the weekend. On the one hand, a large part of the ginning plants within the territory will plan to purchase the scales on September 15-20, while the seed cotton picking will be launched from the eastern Xinjiang and the northern Xinjiang to the southern Xinjiang.

With the direct subsidy scheme, the dystocia was echoed by the three phase "cotton vane" of the ICE cotton, the zhengmian futures and the commercial cotton electronic matching. The wind vane actually fell to the same position. The CF1501 and ICE12 contracts almost broke down 14000 yuan / ton and 65 cents / pound respectively, causing panic and high concern among cotton growers, cotton ginning mills and cotton growers at home and abroad. The market atmosphere was constantly spreading. The expectation that the main contract of ICE will be broken down by 62 and 60 in the Chinese market will rise again.

Several international cotton traders and Chinese cotton mills and traders generally believe that the Chinese government will continue to tighten the quota control policy. The 60 cent or even 55 cents of the December contract will bring about 40% full customs duties to import SM and above cotton. Therefore, China's direct subsidy policy is like a "fuse" or a large number of ICE long and speculative funds fled.

What are the impacts of China's "direct subsidy" program on ICE?

First, cotton subsidies will be directly restored to cotton farmers, and the pricing power of cotton will return to the market. The difference between domestic and foreign cotton prices will be narrowed gradually and even horizontally, and the competitive advantage of outer cotton may even be cut down.

On the 5-9 th of September, the main contract low of ICE closed at 63.93 cents, calculated at the base of 12-13 cents, SM level.

The low price offer should be at 76-78 cents / pound (cotton trader basis is generally calculated by 13-15, adjusted slightly according to the ICE disk and counter offer), and the quotation is about 14080-14260 yuan / ton after customs clearance.

In September 9th, a major international cotton trader quoted 9-10 2014/15 shipping date EMOT SM 1-1/8 and EMOT M 1-1/8 for 81.5 SM / lb, 79.70 cents / lb (guaranteed to deliver before December 25th), 14770 yuan / ton, 14600 yuan / ton respectively, and the cotton trader's base widened to 17 cents / pound.

Judging from the current domestic textile enterprises and cotton enterprises, the new cotton listed price is 14000-15000 yuan / ton, and the internal and external cotton has been in the same direction. However, as the price of CF1501 and CF1503 has been down to 13600 yuan / ton, the spot price of ICE and national cotton will be further explored, or Zheng will rebound strongly and take the initiative to close to 14500 yuan / ton. It is obvious that at present, whether ICE futures or new cotton prices downward in 9-10 months, the driving force of the new cotton price should be significantly higher than that. When the new cotton price, quality and delivery date all have strong impact on cotton and cotton in the year of 2014/15, ICE futures will only have to deal with the challenge of "challenge".

Two, "direct subsidy" makes the expectation of additional import quotas in 9-12 months fall short, and the quota regulation in the first half of 2015 will continue.

The implementation of directional direct subsidy to cotton fields in Xinjiang has effectively protected the impact of falling prices of seed cotton and lint on the interests of farmers. It hopes to achieve the purpose of maintaining farmers' enthusiasm for planting cotton and stabilizing the cotton planting area. Through the market "lever" rather than the widely criticized import quotas, it can restore the export competitiveness of China's cotton and textile industry and garment industry. Meanwhile, the cotton processing enterprises and cotton business enterprises that are "Granny not painful, uncle do not love and have serious excess capacity" are put on the market.

Some agencies analyzed that after March 2015, the Chinese government had a strong anticipation of the resumption of the national cotton auction, and the base price of the 3128 tier auction could be adjusted to below 15000 yuan / ton, increasing the pressure on purchasing the ginning plant with the courage to "take the risk of making a risk", and at the same time, the cotton textile enterprises had a wider choice of raw materials -- 2014 new cotton, national cotton and imported cotton.

It is worth noting that in order to solve the problem of Xinjiang cotton sales and support China's key cotton enterprises against foreign businessmen, it is said that 2014/15 will be awarded to the Xinjiang production and Construction Corps, new cotton group, China cotton group, Hubei Yinfeng group and some large scale cotton enterprises in mainland China in the year of 2014/15. From the hands of these enterprises, Xinjiang cotton will be allocated cotton import quotas in accordance with 3:1 or 4:1, but whether the general trade quota or processing trade quota is still unclear.

Three, the "cotton direct subsidy" in Xinjiang cotton region of China has challenged the import of cotton and cotton in the United States. Under the premise of returning to the market economy, the attention of the ginning mill to grade, "three silk" and processing quality has become more and more prominent. Xinjiang cotton will replace many high-grade cotton flowers such as American cotton, Australian cotton and Central Asian cotton.

"The cusp", regardless of the corps or local ginning factory, in order to compete for customers, in order to seize the market, in order to speed up capital recovery, improve the lint quality, improve the spinnability, and reduce the "foreign fiber" and short pile content, it becomes the only way out. Therefore, the "three wire" short board with high content in Xinjiang cotton will be gradually higher than the cotton and cotton in Xinjiang, reaching the level of "strict classification and grading of seed cotton" before the national storage and storage, strictly controlling the "three silk" entry level, and even hiring workers to pick "three silk" to improve the quality to meet the demand of textile enterprises. "Direct subsidy" guarantees farmers' income, improves the export competitiveness of cotton textile enterprises, and promotes cotton processing and business enterprises.

When Xinjiang cotton once again grabbed the market share from the US cotton and Australia cotton and basically realized the goal of "state-owned cotton," the purpose of national regulation and control will be completed, and the spot pressure of ICE cotton and cotton can hardly be reduced.

Four, Xinjiang cotton region trial "direct subsidy" is conducive to March 2015, continue to do not limit the overseas cotton storage, accelerate the de stocking, while blocking the import of low grade India cotton, Pakistan cotton and some West African cotton.

It is understood that as of the end of August, the national cotton auction was temporarily closed, and the state reserve cotton bank still had about 1150-1180 tons, of which three or four cotton accounted for more than 60%, while the no limit purchase and storage caused a decline in grade, "three silk" seriously exceeded the standard, and the situation of heavy losses occurred frequently.

Higher than foreign cotton is also a major obstacle), taking into account the severity of storage degradation, a large number of occupied funds and national storage capacity and so on, throwing storage in 2015 is still a key factor determining or restricting cotton prices, compared with the United States cotton, India and other cotton producing areas are not broken.