The Violence Of Cotton Is Very Surprising.

In the face of the correct trading logic, the difference between details may result in two opposite directions.

Therefore, at this critical moment, attention to detail is often more important than emphasizing paction logic.

There is no doubt that cotton reserves are coming out, but as long as no dust is settled, all analyses and expectations are like castles in the air, which is the most important reason why the industry deeply expects the policy to land.

Take the empty side for illustration.

First, the 11 million tonnes of high inventory and the immediate pressure to go out of the warehouse are the main reasons for the price drop; yes, but the news that the high inventory and reserve cotton plan has been rolling out for 5 years or so is neither emergencies nor the latest situation. This factor has been almost digested by the market since its decline this year.

There is little correlation between the current and future price trends. This is like the darkest night before dawn. Before the policy comes out, it is often the most sluggish period of the market. If the dust settles, the market will not show another prospect.

Two, the link between reserve cotton production and international market can indeed interact or even spiral downward. However, such inference requires at least two prerequisites: first, the output of cotton reserves is a substantial pressure on international cotton prices; the two is that domestic spot prices are not able to withstand the pressure of large quantities of cotton reserves coming out of the warehouse and compete to reduce prices.

The first is from the fact that China is basically two independent markets in the international market when the quota is limited and the cotton reserves are not exported. "You go through your good road, I walk my single log bridge", the bad pressure of the reserve cotton has already been digested by the international market, and there is no pressure on the current cotton price. Even the global cotton production in 2016 has not been affected, and has not been reduced (such as table 1).

From the perspective of Global trade, the current cotton trade in China, or even the change of cotton yarn trade, is not a decisive variable in the trade changes that need to be considered by major producers such as the US and India. It can be completely compensated by the demand change of other emerging countries (Table 2).

Source: ICAC3 month forecast

The second one is that there is no pressure on the competition between Xinjiang enterprises and national cotton stores that still hold a large number of commodity cotton? Can we not reduce prices? In fact, the price of spot prices has continued to fall. But the price reduction has not exceeded the previous year, and the price of some enterprises has not broken through the rigid cost.

With the reduction of domestic spot resources, the spot trading situation has changed recently. Whether the change is sustainable depends on the details of spot supply structure and supply main body.

According to the national cotton trade statistics, as at the end of March, Xinjiang cotton had 950 thousand tons of stock in the territory's warehouse, and the total amount of 1 million tons of cotton that had not yet been sold in the mainland warehouse was two months' cotton usage.

Secondly, many viewpoints ignore the problem while emphasizing the pressure of new cotton sales. The remaining cotton is becoming more and more centralized in the new year. Concentration is not human dominated, but the market is gradually formed in the process of paction.

But if resources are invisible and concentrated by a large number of households, who will take the initiative in the next few months? Who will have the final say?

Three, support

Another factor is to block the import yarn.

It is undeniable that the original intention of policy formulation is to "guide the smooth operation of the market, promote the sustained and healthy development of the industry" and enhance the competitiveness of the textile industry. Therefore, it is necessary to properly block the import yarn on the basis of the digestion of inventory, but it will not be realized at the expense of unnecessary national wealth sacrifice and inefficient productivity recovery.

In this sense, the author believes that there is no possibility of blocking the import yarn by price "hard landing", and there is no artificial reduction.

The base price of the warehouse affects the motivation of the international market.

The price difference between the CCIndex index and the Cotlook A index has basically been around 1000 yuan since March. With the recent increase in ICE prices, the price gap has further narrowed. Compared with last year, the price difference has been further narrowed. The difference between the inside and outside cotton prices is the best in five years, which is not only conducive to the improvement of textile enterprises' market competitiveness, but also to the recovery of textile production capacity.

The monthly import of yarn has been declining.

Production capacity is constantly recovering, the overall level of capacity in January has been rising, and has returned to the level of December 2014. In March, from the current situation, the good situation remains unchanged, and these changes occur before the storage of cotton reserves.

It is pointed out that without the participation of reserve cotton, the current improvement of textile operation status is real, and the cotton spot price is objectively supported by the demand side.

Four, the last negative factor is very strong, that is, the market rumors of reserve cotton out of the Treasury after re examination, there is a larger discount.

Here, regardless of whether the policy is final or not, simply analyzing from the viewpoint, I think it needs to be separated.

There is no problem of water loss in weight inspection. According to the actual weight, the textile factory can reduce the weight uncertainty and possible losses compared with the previous cotton storage. However, it does not have a substantial impact on the price of the starting product. Instead, it may be more pparent because the weight and the main indication are clear and pparent, so that the paction is smoother and the bidding is more competitive.

The quality of the discount is real, but I do not think it is necessary to enlarge the negative effect particularly. There is no necessary link between the internal quality index and the storage life, so that the quality is pparent, so that the cotton that sells out of the warehouse is genuine and marketable, which is the most important consideration of the paction side, and that is the foundation of the success of the paction.