The Policy Of Cotton Market Regulation Has Been Put Forward In Succession.

Recently, the regulation and control policy of cotton market has been introduced densely. First, the policy of reserve cotton rotation is initially clear, and the time is postponed to the middle of 4. Secondly, the target price of cotton in 2016 is set at 18600 yuan / ton, which is 500 yuan / ton lower than that of last year.

For the two policies, we believe that

Supporting cotton prices at a time lag.

At the same time, although the target price reduction is not conducive to cotton planting, huge reserves can make up for the gap between supply and demand, and even reverse the structure of supply and demand.

Therefore, we believe that cotton prices will be stronger, but in the long run, the supply of cotton will increase.

Still suffer a great downward pressure.

The policy of reserve cotton rotation is initially clear.

After March, there was a rumor in the market about the storage of cotton wheels. A number of versions appeared before and after, and one of the most widely spread versions was that the reserve cotton would be put into operation in early April.

Textile enterprises are very cautious in purchasing cotton under the anticipation of the coming out of the reserve cotton, and insist on the strategy of buying and buying along with the purchase, keeping the stock of cotton at a low level.

But recently, the head of the development and Reform Commission said that the initial scheduled time for the delivery of cotton reserves was scheduled to be in the middle of 4, later than expected.

From the perspective of market circulation,

Waiting for the reserve cotton to go out, the inventory level of raw material cotton is relatively low.

At present, the storage of cotton wheels is initially clear and the time is delayed. Textile enterprises need to purchase more than half a month from the market to meet the production demand.

Judging from the current sales situation of cotton enterprises, the cotton consumption in the country is just over half. After a month, the cotton reserves are coming out of the warehouse.

Within a limited period of time, cotton prices have limited space to raise prices to speed up the sale of cotton.

To sum up, the stage replenishment of textile enterprises will support the spot market price of cotton, but it is difficult to rise sharply.

Falling target prices further reduce cotton planting willingness

The national development and Reform Commission announced the target price of cotton in Xinjiang in 2016 was 18600 yuan per ton.

The target price is reduced by 500 yuan / ton compared with 2015, and the initial calculation is equivalent to 0.2 yuan per kilogram of seed cotton price per kilogram.

In 2016, the average seed yield per unit area of cotton in Xinjiang was calculated by 250 kg / mu, equivalent to 50 yuan per mu.

The total sales price of seed cotton sold by cotton growers in Xinjiang in 2015 was 7 yuan / kg (market price + target price subsidy), which is equivalent to losing about 7 kilograms of seed cotton income.

So what is the impact of target price reduction on cotton growers' willingness to grow in 2016? The loss of income caused by target price reduction can only be made up by increasing the yield per unit area. Considering that the fixed cost of irrigation, plastic film and mechanical operation will not decrease with the yield of cotton seed during the cotton growing process, the actual loss will need to be higher than 7 kg of seed cotton yield.

In other words, in cotton fields with 2015 basic or slightly profitable profits, if there is no possibility of further improvement in yield per unit area, it will be more likely to switch to other agricultural products.

This is also in line with the original intention of Xinjiang's target price reform: shifting cotton planting to the advantageous producing areas, pferring to the suitable cotton area, and leaving the low yield fields and the non suitable cotton areas.

The policy is also in line with the spirit of agricultural destocking reform, guiding cotton farmers to reduce cotton planting through the adjustment of target prices, so as to ensure the smooth progress of inventory.

To sum up, we believe that the decline in target prices will have an obvious impact on cotton production at break even point, and the willingness to grow cotton in the region will further decline.

However, the existence of China's huge reserve cotton can make up for the gap between supply and demand of cotton in 2016/2017, and even reverse the pattern of supply and demand.

Therefore, the target price reduction in 2016 will not be reflected in the promotion of cotton prices in the new year.