Cotton Storm: Behind Cotton Prices

It is an important commodity and an industrial raw material for millions of households.

Recently, the price of cotton has been stir fried, causing widespread concern inside and outside the industry.

Data show that cotton futures in April 1st, CF1701 contract closing price of 10030, to July 1st, the CF1701 contract closing price of 15420, set the current round of the new high.

The price increase in other months is also close to this range.

In just 3 months, cotton futures prices have risen by nearly 50%.

The soaring price of futures has led to a sharp rise in spot prices. The funds from the cotton industry have made the cotton "scrambled", and this "blowout" market has led to a downward trend.

The factory is caught unprepared, which has seriously affected the normal production of downstream textile enterprises.

Usually, in order to maintain normal production, cotton mills usually have raw material stocks for several months. After the Spring Festival of 2016, the expectation of "throwing the store in March" made the textile enterprises dispel the idea of purchasing large quantities of raw materials and wait for the boots to be thrown. However, when the time came to April, there was no exact news of throwing the store, and many textile enterprises began to worry.

Until May 3rd, the storage and storage began to come into operation. This time was more than a month later than the expected storage time.

It is more than a month's delay that the textile enterprises eager to "wait for the rice pot" can only be forced to buy high priced cotton from traders.

After May 3rd, the problems such as slow storage and warehousing, and "squeezing toothpaste out of storage" behavior made textile enterprises passively.

Speculators use the "godsend time difference" to push prices up again and again.

In addition, with the explosive development of the market in June, the promise of incremental dumping has not been fulfilled, and the reserves have been reduced to less than 20 thousand tons per day, artificially resulting in the shortage of cotton in the market. The bull market has been encouraged, and the price has been pulled up continuously, resulting in a market crash.

China has 11 million tons of cotton lying in the country's warehouse. Why is there a shortage of cotton in high storage? In the "three down, one down and one subsidy".

Under the general train of thought, this abnormal phenomenon deserves our attention and reflection.

In addition, the "cotton storm" since April 2016, the timing, position and rhythm of the "bull trading" market has been "precise" to an unusual degree.

For example, each increment (30 thousand tons) or reduction (20 thousand tons or lower) the day before, the futures market will be early response.

Speculators in the market are driven by the strength of capital, and the price of cotton futures is close to the daily limit several times.

Cotton futures prices soar in a short period of time also led to soaring spot prices, disrupting the normal production deployment of enterprises, resulting in the downstream cotton mills complain incessantly.

Cotton is a staple commodity.

Cotton prices are determined by the market, high prices and low prices, prices and prices are normal, but if there are no major emergencies such as earthquakes, terrorist attacks, and so on, it should be a normal slow down and slow down, rather than a sharp rise and fall in a short period of time. Occasional unexpected factors may temporarily derail the price, but will soon return to the original track, and production enterprises will be prepared for this.

Nowadays, under the speculation of speculative capital, China's cotton market has gone up and down sharply in a very short time, making the price seriously divorced from the actual situation of the textile industry.

Some enterprises have signed contracts abroad and have just returned to China. The price of cotton has risen substantially. If a company fails to fulfill its contract, it will lose credibility and be in a dilemma.

In our country, the policy of "collecting, storing, throwing and storing" was originally good, stabilizing market prices and striving for pricing power of cotton.

But the execution must not be out of shape.

At present, the relevant departments have enough chips and funds to control the market. "The national team" also has money in their hands. "We can get more water and more water than we can". We have a lot of moisture and humidity. We should keep pace with the cotton market.

This obviously abnormal market did not achieve the purpose of the original policy, but also moved towards the opposite of the expected result of the policy.

The original state reserve cotton is used for downstream textile enterprises, traders can not participate in shooting storage, but in 2016 allowed traders to participate in shooting storage, although this can alleviate some cotton mill's financial pressure, but the side effect is that traders in the hands of a large number of hoarding goods, some traders photographed but did not pick up the goods, artificially caused the outlet of the "barrier lake".

The futures market serves the spot market, and normal fluctuations and moderate speculation are allowed. Moderate speculation is the lubricant of the market. But if the industry is too hyped out of the industrial base and the speculators take huge amounts of money and go wild and gamble, the futures market will become a gambling casino.

For China alone, in "cotton yarn -- textiles" --

There are about 1.7 billion employees in the retail industry chain.

At present, the textile and garment industry is still an important means for China to earn foreign exchange for export, solve employment problems and boost domestic demand, and to a certain extent, cotton is the cornerstone of economic development and social stability.

Therefore, it is very important to build a stable, safe and efficient cotton management system.