Cotton price: policy-driven market

Cotton price: policy-driven market

Cotton supply continued to increase in global cotton production in 2011. The global cotton supply was relatively loose compared to the previous year. International cotton supply was slightly greater than the demand of 2 million tons. The global cotton stock consumption ratio rose from 40% in the previous year to 48%; domestic new cotton was listed early in the cotton industry. Expected high yield, the national cotton production in 2011 is expected to be around 7.4 million tons.

Although the continued widening of the cotton price gap between inside and outside China will attract traders to increase cotton imports, the actual import will not be significantly increased due to the import cotton policy and the restrictions on medium- and high-grade cotton resources.

From the perspective of China’s cotton imports over the years, China’s imports of cotton from the United States and India accounted for more than 65% of total imports, but uncertainties in the import market in 2011 due to uncertainties in the US’s cotton production reduction and uncertain Indian cotton export policies. .

In January-October 2011, China imported 2.195 million tons of foreign cotton. It is estimated that the number of imported cotton in China in November and December will be around 250,000 tons. From September 2011 to December 2011, the number of Chinese cotton imports will be 100- About 1.2 million tons. In the first eight months of 2012, imports are expected to be around 1.2 million tons.

Considering that the quantity and timing of cotton import quotas for 2012 are uncertain, to stabilize domestic cotton prices and reduce the impact of low-priced imported cotton on the domestic market, it is not ruled that the country will reduce or postpone the issue of imported cotton quotas in 2012, or adjust the import cotton quota. Tax level and so on.

In 2011, China’s textile and apparel exports showed a decreasing trend in terms of cotton consumption. Although the overall export value maintained a relatively high growth rate, the number of exports remained the same as last year or even decreased. In 2012, the total volume of textiles and apparel exports to Europe will decline significantly. In the first half of 2012, the export situation of the textile industry is not optimistic.

As the price of cotton is relatively stable, while the price of cotton yarn continues to fall, spinning profit margins shrink. Insufficient orders from textile companies result in insufficient operating rates and there is no improvement in cotton demand.

Looking at the inventory level of finished goods produced by textile enterprises, the inventory of gauze in textile enterprises has decreased, but orders have been reduced so that companies continue to be in the process of destocking.

As the 2011 cotton price is not expected to fluctuate significantly, traders’ inventory will decline, and textile companies will resume buying cotton by the way they used to buy before 2010.

The low stocks of traders and the purchase of cotton purchased by the textile companies along the way will make the impact of cotton price fluctuations more quickly to the downstream.

Temporary purchase and storage of cotton prices to support the 2011 temporary purchase and storage policies at different stages have different effects on the market:

In the initial stage of acquisition, in order to promote the purchase and storage transactions, the higher market price of cotton must be closer to the closing price.

During the period of concentrated acquisition, Xinmao's listing pressure increased. The rhythm of collection and storage responded to market expectations and the strength of the state's support of the market. The planned increase in reserve and actual trading volume will continue to support the market.

In the later period of the acquisition, the reduction of listing pressure and the reduction of circulation resources will make the spot price and the price of the price fluctuate around the closing price, which will make it easier for companies to find opportunities for hedging and purchase appropriate resources.

The traditional control means can hardly support the prices of seed cotton, cotton yarn and downstream textiles. It is also likely that low-cost imported cotton and imported cotton yarn may hit the market. In order to ensure the country's support for the cotton market, the country is expected to implement the cotton-related policy. A series of adjustments. In terms of policy, we should pay attention to four points:

First, whether the import cotton quota system will be adjusted, whether the number of payments will be reduced, whether the issuance rhythm will be delayed, and whether the imported cotton-slip taxation formula will be adjusted.

The second is how to determine the temporary purchase and storage price for 2012. It is expected to be determined by the end of March 2012. If reference is made to the benchmark established in the previous year, the cotton-to-maize price ratio of 1:10 should be calculated and the storage price for the next year should reach 21200 yuan/ton.

Third, if the country will deposit and reserve the stable cotton price, how will the price and form of the reserve deposit be determined?

Fourth, whether the state will impose certain restrictions on cotton yarn imports.

The price of cotton will continue to fluctuate within a narrow range under the support of storage and storage. However, with the increase in transaction volume to 2 million tons, the supply and demand relationship in the domestic cotton market will improve. In the short to medium term, the cotton market will experience more shocks. However, in the long run, the long-term well-being of cotton prices depends on macro and downstream textile demand.

The important nodes of the cotton price trend need to focus on the four areas where the cotton-related policies may be adjusted. If the macro-economy does not improve after the completion of the storage, the large-scale structural adjustment of the textile industry does not rule out that the cotton price will continue to fall. (The author is a researcher of the Galaxy Cotton Industry Ministry)


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