Cotton Supply Structural Contradictions Will Not Overturn The Overall Situation Of More Shocks

How much impact will the postponed storage policy have on the cotton market? It can be defined from two aspects: first, the extension of a month's storage period will roughly increase the supply of 420 thousand tons, strengthen the buyer's advantage and weaken the seller's advantage. This is a bad news of policy. Second, this is a structural contradiction of supply in the time dimension, rather than a creative subversive contradiction. It will change the rhythm of the cotton market, but it will not overturn the overall situation of excessive volatility.

From March 6, 2017 to July 21st, the cumulative turnover of cotton reserves totaled 2 million tons, with a turnover rate of 68.54%.

If there is no delay in dumping, it is estimated that by the end of August, the turnover of cotton reserves will reach about 2 million 500 thousand tons.

In the case of delayed storage, the author estimates that by the end of September, the turnover of cotton reserves will reach 2 million 900 thousand tons.

And China in 2016/17

The gap between production and demand is 3 million 212 thousand tons, plus 1 million 89 thousand tons of imports. There is still a gap of 2 million 123 thousand tons, which needs to be stabilized with reserve cotton.

The extension of a month's storage period will roughly increase the supply of 420 thousand tons. The tight supply and demand pattern of the original supply and demand is broken to a slightly looser supply and demand pattern.

In addition to the increase in reserve cotton supply, the policy also has an impact on the psychology of trading.

Small and medium-sized cotton mills can not be fully stocked because of the limited financial strength, but large cotton textile enterprises have been fully stocked to cope with the shortage of raw materials after the end of the dumping. Some traders are stockpiling goods to sell at a high price in September and October.

The delay in throwing storage delayed the rhythm of the market. The buyer's psychological advantage was strengthened, and the seller's psychological advantage was weakened.

So,

Short term policy is bad, making the domestic supply and demand structure changed from tight balance to slightly loose, which makes the trading psychology changed from seller dominant to buyer dominant.

The policy of postponed storage is essentially a structural contradiction of supply in time dimension, rather than a creative subversive contradiction. The energy of the period can not change the overall situation of the long term volatility of domestic cotton market.

First of all, the reserve delay is only to bring the future supply to the present, the supply is increasing now, and the future supply is decreasing.

This is not the creation of supply by nothing. The two is the uneven distribution of supply in the time, but the future is more profitable.

Secondly, the time of dumping and storage is only 1 months, and the number is expected to increase by 420 thousand tons. Its energy is limited, and it can change the short-term rhythm, but it can not change the overall situation.

Enterprises generally believe that if

As of the end of August, the price of cotton will show a trend of high opening and low going. The price of the new year will be 15500-16500 yuan / ton. If the cotton reserves are postponed to the end of September, the price of cotton will show a trend of low opening and rebound, and the price of the new year will be 14500-15500 yuan / ton.

Therefore, the recent cotton reserve policy has become the focus of attention of enterprises.

Although the power to go inventory has been seriously weakened, it is still going to the stock state, and the inflection point of inventory accumulation has not arrived.

Optimists can define the general trend as "more shocks". Pessimists can define the general trend as "wide concussion", but the time for the general trend to fall is yet to come.

To sum up, the delay in storage increases short-term supply, which is a bad policy. The short-term market tempo is changed from shock to volatility. Secondly, the delay of dumping and storage is a structural contradiction in the time dimension, and its time and space energy is limited, which is not enough to change the overall situation with more shocks.

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