How To Avoid The Risks Faced By The Silk Industry

Silk is a special industry: first, there are many uncertain factors in the production of raw materials; the two is the long chain of industrial industries; three, the demand for silk is one-way.

It is precisely because of these particularities that silk has become the most frequent and volatile industry in large textile industry.

1995, 1998, 2002, 2005, 2008 and 2011 are

In the age of ups and downs, the price fluctuated more than doubled in some years.

This is the commodity that I have seen the largest price fluctuation in bulk commodities.

For example, in 1995, the price of dry cocoon on the chinese cocoon silk market reached the maximum of 72 thousand yuan / ton, and the lowest price dropped to 26 thousand yuan / ton, which is close to two times.

The sharp rise and fall of the price has great damage to the industry. After 1995, a large number of large enterprises went bankrupt, so that year has been deeply incorporated into the silk history.

First, the contradiction between price fluctuation and "risk aversion".

The development of enterprises needs a stable environment, but objective reality can not guarantee that such an environment exists or persists.

Therefore, most enterprises are "risk averse", because the purpose of enterprise production is to obtain stable profits through product sales, rather than to take speculative risk by consciously taking price risk.

Specifically, silk producers and traders are facing the risk of falling commodity prices.

When prices fall, the commodities they hold will lose money.

Similarly, silk reeling plants and silk mills that need to buy raw materials continuously will face the risk of falling silk commodity prices once raw material prices rise, which is due to the misplacement of raw material pricing and silk commodity pricing in time.

After the economic globalization, the fluctuation of commodity prices will increase correspondingly. Silk is a part of bulk commodities. Naturally, it will not be left alone, so this is not a good thing for the vast majority of silk enterprises and traders.

Besides the above effects, price fluctuations will also bring about serious consequences such as improper liquidity arrangement and disjointed production and marketing.

With the intensification of market competition, enterprises will increasingly feel the pressure from price fluctuation.

Two, the situation facing silk

From a macro perspective, as the world economy is still in the period of adjustment after 2008, although the developed countries are out of the trough, it is almost impossible for them to return to the past. Over the past few years, the emerging countries have begun to adjust downward from 2011 until the adjustment period (at least three years) has been postponed. It is expected that commodity demand will remain depressed in the next few years, because the adjustment of the economic structure is painful and costly.

Microscopically, the ratio of silk adjustment

The adjustment period is quite two years late, so at least in the past one or two years, the upward momentum of price is much less.

The key factor supporting the price of silk is its "resource", but any resource commodity must have a degree. Once it exceeds this level, it will lead to shrinking demand, even if oil resources are extremely strong.

At the same time, silk and cotton spinning, which have a parity relationship with silk, have been forced to lower their high heads because of their long and low price operation and the greater impact of the appreciation of the silk from the appreciation of the renminbi.

To sum up, both macro and micro fundamentals are unfavorable to the development of silk.

In addition, the surplus of silk processing capacity will still be a helper of ups and downs.

In particular, the Guangxi factor will play a very important role.

Guangxi's cocoon has occupied half of the country, and its processing capacity has reached at least 2/3 of the whole country, which is the fundamental reason for the high price in Guangxi.

The lethality of overcapacity is reflected in its excessive market reaction, which exaggerates the shortage or surplus of raw materials.

Under such a background, price overestimation and underestimation are affirmative.

However, the market will eventually use its own rules to correct these deviations from the market, so the Guangxi factor will increase irrational changes in the market.

Three, relying entirely on the predictive market has proved to be a failure.

The risk of price fluctuation is directly related to the quality of business, so any enterprise should attach great importance to it.

Many managers often rely on their own market experience for a long time to choose ways to deal with them.

For example, when forecasting the price rise, we should constantly increase the raw materials reserve and speed up product sales; when judging the price fall, we should buy or stop buying raw materials at the same time, and sell products in advance.

However, in view of the reasons such as the level of enterprise's anticipation and the cost of capital, the risk of hedging is often hard to reach the ideal level, sometimes even the opposite result.

Therefore, the author should advise people who have such a concept and behavior: never try to control the market, because the market is always elusive.

The experience of most enterprises in the risk years listed above is a good example.

Four, how to avoid risks

There are three kinds of tools to avoid commodities risk: first, commodity forward contracts; two commodity futures contracts; and three commodity options.

Commodity forward contracts are non standardized spot contracts.

But according to the author's understanding, at present, the silk industry really has nearly zero spot contracts, and can get 30 to 60 days order.

Therefore, in the silk industry, it is not realistic to use spot forward contracts to avoid risks.

Options are based on futures, and they are derivatives of futures.

In addition, China has not yet had an option contract, and there are only a few options that will soon be introduced, such as white sugar.

Cocoon silk has no futures, so it's far from an option.

It is feasible to substitute the existing two medium forward market contracts for futures contracts.

Because they all have the medium and long term pricing mechanism, plus the high degree of correlation between the spot price of silk and the forward and forward market prices, it is entirely feasible for the silk industry to hedge risks by hedging pactions.

We should not simply assume that hedging means selling, but in fact there are buying pactions.

For example, the silk factory is worried that the price of raw materials will rise in the future, so that he can buy hedging in the medium and long term market.

In addition, hedging is not made in physical delivery, and it should be hedged after maturity.

Hedging can avoid risks because it is determined by the axioms of price changes.

That is to say, in the two markets, hedging pactions can be made up of one market profit to compensate for the loss of another market in accordance with the opposite direction of trading, the same type of paction, the equal number of pactions and the same or similar principle of trading month.

Such a hedging can be achieved.

Purpose.

Silk has entered a comprehensive risk management era. It is not pferred by human will. If our enterprises ignore risk management, they may undertake more risks in the future. It is not just price risk.

So the risk is everywhere, the key is how we deal with it.