Cotton Prices Can Not Escape Shock Trend Is Not Very Good.

According to the report of the international cotton advisory board (ICAC), the global cotton output in 2015/2016 will reach 23 million 110 thousand tons, down 11.7% from the same period last year, and the consumption will be 24 million 370 thousand tons, up 0.54% from the same period last year. The cotton stocks will be 21 million 920 thousand tons at the beginning of the year, and the final inventory will be 20 million 650 thousand tons. We believe that the global cotton inventory needs to digest for several years or more, and the huge stock pressure will hinder the rise of the international cotton price.

We expect that the global cotton planting area in 2015/16 will be reduced by about 2% over the previous year.

Under the background of the opening of the US interest rate raising channel and the structural reform of domestic economy, we expect that China will continue to maintain relatively loose monetary policy in 2016 and support the domestic economy.

Or will cut interest rates or reduce the accuracy, which may cause two aspects of cotton impact: first, the cost of textile enterprises will reduce the cost of stimulating textile enterprises to cotton demand; two, the central bank's interest rate cut will lead to narrowing of the internal and external spreads, or will lead to the depreciation of the RMB, which will have a direct impact on the mainland's textile industry to enhance its international competitiveness.

In 2015, the total output of cotton in China was 5 million 605 thousand tons, a decrease of 9.3% over the same period last year, and the total consumption was about 7 million 500 thousand tons, a decrease of 6.25% compared with the same period last year, with a terminal inventory of about 11 million 980 thousand tons, a decrease of 6.77% over the same period last year.

As cotton prices have dropped sharply in the past three years, down to the cost of planting,

The frustration of confidence will take a long time to repair. It is estimated that the attraction of competitive alternative crops (grains and soybeans) will continue to increase in 2016.

It is estimated that cotton output will be about 5 million 300 thousand tons in 2016, down 9.3% compared with the same period last year, and the total cotton consumption will be about 7 million 300 thousand tons, down 2.7% from the same period last year.

We expect the whole country in 2016.

Supply shortage of about 2 million 500 thousand tons, but the stock is still in the vicinity of 12 million tons of high, the task of stock is still not finished, coupled with the downstream market has not been improved, cotton prices in 2016 there is no room for substantial increase, but do not rule out a partial rebound.

On the whole, we believe that cotton prices are still at the low level of the bear market cycle. Only after the late inventory has been improved, the cost and benefits of planting cotton have been improved and the situation has been improving.