Under What Conditions Will Cotton Prices Explode?

From the perspective of historical rule and experience, when the stock reaches the extreme value and turns to the top, the market will also show a bottoming up and a bull market.

The resumption of Zheng cotton futures since March of this year is precisely the recurrence of this rule.

In recent years, there have been two impressive gains in the global cotton market.

One was in the autumn of 2003, when global inventories and consumption were as low as 38.71%, and the other was in the autumn of 2010, when inventories / consumption were as low as 39.58%.

Based on many years of observation, we will give you an empirical value for reference: when the global inventory / consumption ratio is below 50%, the market is basically in a critical state of explosion.

In addition, from the past two outbreaks, the rising point is in autumn, that is, when cotton is harvested.

Why is this so? The truth is that the uncertainty of output due to the influence of weather will gradually become clear with the advent of harvest and purchase.

When the supply gap is expanding again, cotton

It is inevitable.

These two conclusions are very important, because the conditions and timing of the next outbreak are basically there.

From historical data, we can see that in the autumn of 2011, the world's cotton production reached the peak of 27 million 600 thousand tons in history, and then decreased year by year, accompanied by the bear market. In the autumn of 2015, the output fell to 21 million 30 thousand tons, and in 2016, the output rose slightly to 22 million 510 thousand tons.

In the past 5 years, global output has decreased by 5 million 90 thousand tons.

Explain

The economic benefits of planting are poor, so we do not want to plant them.

However, in the same observation year, an interesting phenomenon has been noticed: Cotton's slow bear market has not blocked the consumption of global cotton, showing a rigid feature.

Global cotton consumption in 2011/2012 was 22 million 460 thousand tons, and then increased slightly year by year. USDA expects 2016/2017 demand to rise to 24 million 410 thousand tons.

That is to say, consumption increased by 1 million 950 thousand tons in the 5 year.

Comparing the latest production and consumption data in 16/17, the gap between production and demand extended to 1 million 900 thousand tons.

This important indicator remains to be observed in the future.

If we continue to expand, the pattern of cotton rising will not change. At the same time, the end of the world will not change.

It will continue to decline.

If viewed from the end inventory perspective, USDA's latest estimate for the global 16/17 year is 19 million 250 thousand tons, while China's final inventory is 10 million 480 thousand tons.

That is to say, China's inventory accounts for 54% of the world's inventory. If China's inventory data are extracted from the global balance of supply and demand, the global cotton stocks are actually in a relatively stable state.

According to previous analysis, China's cotton market is entering the inventory stage, with about 2 million tons of inventory consumed each year.

Therefore, to observe global inventory data, we only need to focus on China's inventory consumption.

This is the core of the bull market.

Cotton cultivation in China basically shrunk except Xinjiang.

Because of management, cost, manpower and other factors, there seems to be no interest in expanding.

There is still room for expansion in Xinjiang because planting conditions restrict the cultivation of other agricultural products.

Looking at years of data and table 3, China's cotton acreage reached its peak (93 million mu) in 2007/08, and the domestic economic growth rate (GDP 11.4%) is the highest.

The cotton market had a sharp rise in the autumn of 2010, but even so, the latter sown area did not increase.

The real situation is: the planting area in China has been decreasing year by year, to 42 million mu in 16/17.

That is to say, within 10 years, the domestic cotton sown area has dropped by 54%! This decline is clearly seen from the chart below.

The decline in area is also related to two other aspects.

First, the pfer of industries, the pfer of textile enterprises to South Asia; the two is the increase in the substitution of textiles, resulting in a decline in cotton consumption.

Of course, the bear market structure for many years is also an important factor.

For more information, please pay attention to the world clothing shoes and hats net report.