Multi Factor Interweaving Promotes Cotton Prices To Rise

Affected by the El Nino phenomenon and the reduction of global cotton production, the domestic cotton futures market has seen a strong rebound in recent years. This is not only for the upstream and downstream of the cotton industry chain, but also for the upstream cotton growing industry, and the downstream spinning enterprises, as well as the viscose staple market, which has a substitute for cotton yarns, has also achieved a certain improvement.

Perhaps it is under the influence of the above multiple factors that since April 7th, the price of the main contract of cotton futures, the main contract of cotton futures in the domestic futures market, has risen from 1609 yuan / ton to 10375 yuan / ton in April 22nd, reaching a new high of 13450 yuan / ton in April 22nd. Finally, it reached 12840 yuan / ton, up 23.76% during the period, and rose more than 2400 yuan in 2 weeks.

In 2016, the price of cotton target in Xinjiang announced by the NDRC will reach 18600 yuan per ton.

Since 2007, global cotton demand has been insufficient, and global cotton has been in short supply.

The continuous downturn has led to a reduction in the number of producers in the upper reaches of the cotton industry chain, including China, the United States, India, Australia and other cotton producing countries.

Take domestic cotton output as an example.

In 2015, cotton production was only 4 million 250 thousand tons, a drop of nearly 35% compared with 2008.

The United States, Australia and other countries and our country have similar quotas, and the shrinking of planting area directly leads to the reduction of harvest area.

Meanwhile, the export volume of global cotton also began to decline after reaching a high point in 2012. Especially in 2014, cotton exports in India and Australia fell by more than 50% compared with 2012.

With the shortage of demand leading to a reduction in the supply side, extreme weather changes beginning in the second half of 2014 are also important factors affecting cotton production.

Relevant data show that since El Nino phenomenon began in September 2014, it has lasted for 19 months.

The National Climate Center predicts that the El Nino event will last at least until the winter of 2016. It may become the longest time since the systematic record in 1951, and its intensity will reach the standard of the El Nino event.

According to the latest warning issued by the US meteorological department, the super El Nino phenomenon is likely to turn into high intensity in the second half of this year.

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Judging by climate, CNR News reported on April 17th: "in the history of the longest El Nino event, China's meteorological and water conservancy departments judged that this year's flood season in northern and southern China is very likely to have a major flood.

According to the national flood control and Drought Relief Headquarters Office monitoring, so far, 61 rivers across the country have occurred over the police flood, and the flood prevention situation is very grim.

Many parts of our country are preparing for the flood season.

The most noteworthy thing about this news is that the middle and lower reaches of the Yangtze River is one of the three major cotton producing areas in China.

This news report, if the weather is accurate, means that cotton production in the middle and lower reaches of the Yangtze River will be substantially reduced.

For the short-term and rapid rise in cotton prices, Li Tongjun, general manager of Yongan futures Chongqing business department, believed that the cause of the recent increase in the domestic cotton price rise was multiple, first of all, the domestic macroeconomic stabilization and recovery led to the rise of commodity prices, followed by the continuous reduction of cotton supply in the world and domestic cotton, and the continued decline in domestic cotton imports, which resulted in a certain reduction in the overcapacity phenomenon. Third, the downstream textile enterprises had a certain demand for replenishment in 3~4 months, especially the high grade and high quality cotton resources, while the new cotton harvest period was concentrated in 9 and October, and the new cotton supply in the market has a certain gap at present.

Meanwhile, the price of downstream yarns has remained stable since April, which provides strong support for short-term cotton price rise.

In addition to the above three points, Li Tongjun believes that the main reasons for the short term rise in cotton prices are: "in April 15th, the policy of the national cotton storage and landing policy was postponed to the end of April, which was postponed from April to May 3rd (31 months in May 3rd), and the total output of the cotton basket was no more than 2 million tons. The daily sales volume of the registered cotton brand was no more than 30 thousand tons, giving priority to arranging imported cotton wheels." and the price of the wheels was adjusted dynamically according to the market, which undoubtedly gave the market a reassurance in the market. "~8"