How Much Is The Impact Of The National Reserve Announcement On The 1 Million Tons Of Cotton Reserves?

Recently, the State Grain and material reserve bureau and the Ministry of finance of People's Republic of China announced that: in 219 May 5th, 3 months in -9, the plan was about 10 thousand tons of cotton reserves.

1. time, 219 years from May 5th to September 3rd 219, the national statutory working day.

2. quantity.

The total arrangement is about 10 thousand tons.

We should put in a balanced operation and sell about 10 thousand tons per working day in principle.

3. price.

The bottom price of listed selling is determined dynamically according to the market conditions. It is linked to the spot price of cotton at home and abroad in principle. The cotton spot price index in the domestic market and the spot price index in the international market are determined by 5% weight, adjusted once a week.

Interpretation: what do market people think?

China Cotton elite club, Hedge Research and investment founder, senior cotton expert Dong Shuzhi:

Prior to the release of 80 thousand tons of quasi tax quota information, now the 10 thousand reserve round, fully protect the domestic cotton supply and reduce the cost competitiveness of the cotton mill, ease the supply and demand tension this year, coupled with the downstream consumption into the off-season, the possibility of future cotton will weaken, and the probability of domestic and foreign cotton price difference will be further reduced.

Nevertheless, attention should be paid to future weather changes and supply and demand in India.

Li Zhenhua, research director of Xinjiang Lihua cotton industry Limited by Share Ltd: short term impact on domestic cotton market is small, impact on imported yarn is more direct.

1. from a recent point of view, the downstream performance is very weak. It is understood that to a greater extent, because of the lack of reserve cotton for two months this year, the raw material cost of the whole market is going up, so there is a problem of unreasonable matching of orders.

2. at present, many small and medium-sized enterprises even consider shutting down the problem. In the recent two months, these enterprises should have realized that the reserve bonus is only about two years away. This year, the market mentality of RPG is totally different from that of last year.

3. this year, the total amount of storage will be limited.

It is expected that the overall turnover will be in the first few days, and the rate of return will not be very large. It is estimated that the price difference between the reserve cotton and the new cotton will continue to shrink this year.

4. short term reserve cotton is not as big as the impact on the domestic market, because the supply of cotton is not directly related to the supply of cotton market this year. The main problem is that the market is short of low price and low grade cotton resources this year. The reserve cotton is relatively satisfied with this demand. But for the domestic low grade and low price cotton supply, besides the real estate cotton, the others are basically Xinjiang cotton, and the whole is the state of resource mismatch. If the former low grade cotton spinning enterprises will not buy Xinjiang cotton, then the rear will not actually affect the demand for Xinjiang cotton.

5. even if reserves are still not present, textile mills do not need high-grade cotton to produce in the short term, and even if they stop production, they will not buy high-grade cotton.

Because orders do not match, they are reluctant to buy Xinjiang cotton and increase production costs, so the impact on the domestic market is not straightforward.

On the contrary, the impact on foreign markets is more positive, because for foreign markets, if China is short of medium and low grade cotton, the textile enterprises will stop production, then the yarn they produce will inevitably be filled by imported yarn, at least part of which will be filled by imported yarn, so the short term low grade will be compensated after the rotation is made, so the import of imported yarn is suppressed.

So for the external market, there is pressure in the short term. For the internal market, there will be an iterative effect in the short term supply of cotton resources. There is no big improvement in the price of cotton in the southern Xinjiang, and a large part of the southern Xinjiang has no guarantee.

From this angle and term structure, the whole will not have a particularly big impact, because the futures price falls down, the hedging will enter the spot price, this part is still the cheapest middle and high grade cotton.

6. in regard to the issue of rotation, the announcement has been put forward but not explained in detail, but from the present cotton supply structure, including domestic and domestic supply structure, it must be dominated by foreign countries.

Because there is a round of expectations, the external market will not drop too much, is the early entry of the internal fund is relatively uncertain, because the short term to do more power is basically there, if someone withdraws, the short term will drag the disk.