Will ICE Cotton Futures Trend Be Suppressed First?

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The small editor of the net to you is that ICE cotton futures will be suppressed first.

In August 1st, October 1st and November 13th, the ICE main contract respectively set 62.70, 59.65, 58.57 three new low in the past five years, especially after the March contract strength has broken 62, 60 and two strong support positions, the bull and speculative funds' confidence has been completely "collapsed", and the ICE down channel has been opened. Some institutions and Cotton Traders even think that the main contract will break 58 or even 55 cents, and push against the "iron bottom".

Pressure factors are concentrated in: 1, the northern hemisphere cotton is listed in large quantities, the pressure of supply and demand has begun to appear in full scale, especially the United States cotton and India cotton is not only high yield and the possibility of postponing the listing period is not large; 2, the USDA report not only raised the global cotton production, but also raised the end of the 2014/15 stock market, and at the same time, the bullish mood of the consumer market was significantly reduced; 3, the peripheral market continued to fall short of expectations, and the five year low was not only cotton, crude oil, gold, wheat, soybeans and so on, but also "returned to the pre liberation period". The continuous improvement of US economic data caused the US dollar to strengthen. Once the interest rate hike was raised, the nightmare of commodity falling was not yet ended. 4, the Chinese government strictly controlled the speculation of increasing import measures for cotton imports in 2015. Although the quotations of the foreign cotton spot market are relatively slow, the CIF quotation for the shipping date, the spot and the bonded cotton will also be echoed downstream.

It is rumoured that the issuance of the import quota of 894 thousand tons of cotton is likely to be linked to the purchase of Xinjiang cotton by the mainland cotton textile enterprises, and the quota can only be the cotton mill which can get 1% quotas in the past year. Even if the small and medium-sized mills even purchased and consumed Xinjiang cotton, they should "stay on the sidelines". Therefore, the shortage of the quota caused the increase in the US and India cotton export obstruction.

Then the ICE downlink channel has been opened, where can the main contract be bottomed up? In the preceding article, I believe that ICE's objective of falling below 58 is objective, but it is not easy and simple to break down the 55 strong support position. Unless the global economy, the external commodities and the global and Chinese cotton consumption are weak to "a mess", otherwise it will fall below 55, and the hope of approaching 52 is not large. The reasons are as follows:

First, with the cotton production and quality statistics of cotton growing areas in Xinjiang gradually coming to the surface, the supply of high-grade cotton is concentrated in the United States and cotton.

Cotton and part of Central Asian cotton, 2014/15 high grade lint is likely to "thrive" and pull up the difference between M and SLM grade cotton.

According to statistics, as of November 15th, 2 million 200 thousand tons of new cotton and 1 million 790 thousand tons of public inspection were processed in the territory as of November 15th. Recently, a number of agencies and ginning plants have concluded that the processing speed of Xinjiang cotton has reached about 60%, while the picking of cotton seeds in most of Xinjiang's cotton area has reached 80-85%. The northern Xinjiang and eastern Xinjiang and Kashi cotton areas are picking up. According to this calculation, the total output of cotton lint or 350-380 tons in 2014 is much lower than that predicted at the beginning of the year.

Although India cotton is very productive, under the premise of "the lowest seed cotton purchase price" and the "market support" of the government, the competitiveness of the cotton industry is very inadequate compared with that of the United States. And if the quota is only 894 thousand tons, the cotton enterprises will definitely use "good steel on the knife edge". The main purchase of high-grade imported cotton will not give India cotton, Pakistan cotton and African cotton too many opportunities.

Two, with the upgrading and upgrading of equipment in India, Pakistan, Vietnam, Indonesia and other Southeast Asian countries, it is an inevitable trend to spin high yarn. In 2013 and 2014, the impact on Chinese enterprises' export of C40S and above cotton yarn has already been reflected. Coveted high grade cotton is not only India and Pakistan, but also many national cotton mills in South America, Mexico, Japan, Vietnam, Turkey and so on.

This year, the number of China's imports of US cotton will drop sharply, or even about 50%. Vietnam, Turkey and Mexico will become an important market for us cotton exports. Therefore, it is not necessary to exaggerate the situation of Chinese buyers' breach of contract and postpone shipment and postpone the issuing of 2014/15 cotton.

According to the survey, large quantities of intermediate yarn, medium grade fabric and some high-grade fabrics were pferred to Southeast Asian countries in 2013 and 2014. A large number of overseas factories in China also actively digested high-grade cotton and so on. Vietnam, Indonesia and India and Pakistan exported C32S and more cotton yarn proportion to increase.

Three, in the formulation of the relevant government officials, "in principle, in addition to 894 thousand tons of 1% tariff, cotton imports are allocated extra, and no additional cotton import quotas will be issued". The focus of discussion is on "principle". If domestic and foreign cotton price difference reaches 3000 yuan / ton again, the hope of increasing the export quota of processing trade or general trade cotton will still exist for stabilizing the cost of textile enterprises and enhancing the export competitiveness of the yarn.

Recently, after the main contract of ICE fell below 60, the price of SM grade cotton was only about 70 cents / pound. The customs clearance rates under the 1% tariff and sliding tariff were 11000 yuan / ton, 13500 yuan / ton (customs duty 24.7%). The difference between Chinese cotton mills and India, Pakistan and Vietnam was 3000-4000 yuan / ton. Where did the export competitiveness of Chinese enterprises come from? Once the port's "low price and high grade" of the "high price" outside the port came into the warehouse of China's cotton mill due to quotas, it could only purchase high priced cotton and low-grade real estate cotton, and where did the enterprises survive?

Four, 2014/15

The low price will cause farmers in main producing countries like China, the United States and India to slash their planting area in 2015 and expand the planting of wheat, corn and other crops.

According to the survey, due to the US cotton CIF quotation fell below 75 cents / pound, the cotton farmers and farmers' willingness to sell cotton fell sharply. In order to solve the problem of funds, they have applied for CCC loan Inventory (get 52 cents / pound of liquidity).

The state-owned enterprises in India buy cotton seeds at the lowest purchase price, which is more obvious to the farmers' enthusiasm and enthusiasm for cotton planting.

Therefore, I believe that once the Chinese government does not restart the dumping and storage area after 2015 and March, the cotton planting area will decline sharply. If verified, no matter whether ICE or Zhengzheng will have the opportunity of "retaliatory" reversal, the difficulty of ICE's main contract being 65, 68 or more is not great.