Global Cotton Production Is Declining, But China'S Demand Is Very Strong.

There are many legendary commodities markets in 2016, but the emergence of cotton is most dramatic.

Cotton has been very angry since other commodities rose in the first half of the year.

But almost overnight, cotton futures surged to a two year high.

In July 12th, the ICE rose sharply, breaking 70 cents mark.

The direct fuse for the accidental rise of cotton is that the daily amount of China's cotton reserves is inconsistent with the contents of the April 15th announcement.

In addition, the monthly report on global cotton supply and demand released by the US Department of agriculture in July 12th further boosted cotton prices.

The announcement says that every day is normal.

The number of listed sales is not more than 50 thousand tons, the specific number of rounds is based on actual paction.

If the market price of domestic and foreign market has obviously increased rapidly for a period of time, the turnover rate of the auction sale of reserve cotton will exceed three days or more than 70% days a week, and the number of sales will be increased appropriately.

According to the monthly report, the cotton inventory at the end of the year 2016/2017 was estimated at 91 million 290 thousand packages, a decrease of about 10%, much lower than previously expected.

The reason behind the sharp rise in cotton prices is also due to tight supply in India and Pakistan and strong demand in China.

India textile Commission said recently that due to drought, cotton production in India is expected to reach 730 thousand tons in 2015/2016, down 1/3 from the same period last year, to the lowest level in six years.

A drop in inventory will limit India's cotton exports next year.

Meanwhile, due to poor weather conditions in Pakistan, the planting area has declined, and output in Greece and Uzbekistan has also declined. This provides support for international cotton prices.

While global cotton production is declining, China's demand is strong.

July US Department of agriculture cotton

China's consumption in 2015/2016 has increased by 327 thousand tons.

At the same time, China's Cotton Traders' crazy speculation is also pushing up cotton prices.

From the second quarter of this year, Zhengzhou cotton futures prices entered the rising channel, data show that cotton futures CF1701 contract closing price of 10030 yuan / ton in April 1st, to July 1st, the CF1701 contract closing price of 15420 yuan / ton, set a new round of the current market high.

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

In fact, the price of ICE cotton and the price of Zheng cotton are pulling each other.

International buyers have seen that China's cotton prices have risen in recent months, which has also strengthened their confidence.

And the ICE period cotton and Zheng cotton prices have a shadow of speculation.

Speculators in the Chinese market are making a lot of money. The price of cotton futures is close to the price limit, and the number of sets of insurance companies has been explode. The non production enterprises purchase cotton reserves, which makes the cotton spinning entity enterprises suffer heavy losses.

The policy drawbacks and the speculative buying of traders have caused confusion for the current cotton and cotton textile industry chain. Gao Yong, vice president and Secretary General of the China Textile Industry Federation, told reporters that the main problem of cotton is that China's cotton policy has led to the widening of the domestic and foreign price differentials, which has led to a decline in competitiveness of Chinese cotton spinning enterprises, especially for exports.

At the same time, the inventory and subsidy policy of national cotton stores has made the quality of domestic cotton decline along with the extension of stock time, which has made the cotton spinning enterprises more difficult.