Analysis Of Cotton Rising Factors

The weakening of US dollar contributed to the rise of international commodity futures prices. cotton It has become a leading breed. The Asian subcontinent, India Textile mill Again, it calls on the government to restrict the export of raw cotton, and the recent continuous rainfall may lead to new cotton. list Postponed, resulting in short supply of resources. If India cotton production fails to meet market expectations, it is believed that the government will first use cotton in the country's textile mill as the first step, thereby implementing the policy of surplus cotton for export. At present, there is no sign of weakness in New York's cotton futures market. From the perspective of technical graphics, the December contract has a strong support of less than 100 cents.

　　 Three factors push us cotton continue to rise

China's demand is increasing, the US dollar is falling, and the US's domestic fundamentals are pressing to make New York's cotton futures break through 90 cents. In the short term, there is no possibility of a big pullback in the market. First of all, the low temperature and rainy weather in the main cotton producing areas in China will affect the cotton yield and quality. The market generally believes that the demand for cotton imports will increase in the coming months. At present, the US Department of agriculture predicts that China's cotton imports will reach 2 million 720 thousand tons in 2010/11, the second highest in history. By the end of October, China's new cotton has not been listed on the stock market at the end of the year, and the domestic supply of cotton will be a problem. This time window will create conditions for the rise of cotton prices.

Second, the fall in the US dollar also stimulated cotton prices to increase, and this year's outlook for us cotton exports continued to look good. Recently, the US dollar fell to a 15 year low against the yen and the US cotton export volume reached the highest level in the same period. USDA expects us cotton exports to be 3 million 266 thousand tonnes this year. Judging from the current situation, this forecast is also possible to further increase.

Thirdly, although the fundamentals of cotton in the United States have significantly tightened up in the past year and a half, the future may be even tighter. The US Department of agriculture is expected to continue to increase US consumption and exports in the forecast for September. The end inventory will also continue to decline, and the inventory consumption ratio will drop to a 15 year low.

Finally, the net bull interest rate of ICE futures continued to increase, and the unpriced sales contract reached an all-time high level, which provided an opportunity for cotton prices to rise. Although technical indicators show that ICE futures market has overbought, the above positive factors will prevent a sharp callback of cotton prices.

　 Strong demand in emerging markets

Emerging economies such as China and India have entered the middle and late stages of industrialization. Agricultural development has shown profound changes: first, the price of agricultural labor has risen significantly; two, land prices have risen significantly; three, the living standard of residents has been increasing after the acceleration of urbanization. The acceleration of cost increase and the rigid growth of demand will drive the price cycle of agricultural products to increase rapidly, and its comprehensive speed will increase from 5% in the past 10 years to about 10%.

After China, India and Pakistan are the second and third largest cotton consuming countries in the world, as well as second and third major cotton textile producers. Textile output accounts for 14% of India's total industrial output, and textile exports account for 30% of India's total exports. The textile industry is the pillar industry and the largest export industry in Pakistan. The number of employees is 19 million, accounting for 38% of the total number of manufacturing jobs. The output value accounts for 46% of the output value of the manufacturing industry, and the contribution rate to GDP is 8.5%. Textile exports account for 50% of the total export trade, reaching 67% at the highest. Pakistan's exports of cotton yarn and cotton cloth rank the highest in the world, and its share in the international market is 30% and 8% respectively. In 2009 and 2010, the policies of India and Pakistan to revitalize the downstream textile industry were frequent, so there was great potential for cotton consumption growth in the two countries in 2010/11. There is one particular concern. While developing the downstream textile industry, the two countries also introduced policies to restrict the export of cotton and cotton yarn, so as to ensure the demand for cotton and cotton yarns in the downstream textile industry. The cotton yarn produced in India and Pakistan is cheap and inexpensive, and is very popular in the international market. The two countries have restricted the export of cotton and cotton yarns, which will inevitably lead to tight supply of cotton and cotton yarn in the international market, and prices will rise.

In addition, according to foreign reports, the Pakistan Textile Mills Association said that the flood led to nearly 380 thousand tons of cotton production in Pakistan. It is estimated that the country needs at least 680 thousand tons of cotton in 2010/11 to meet the demand for textile cotton. At present, Pakistan official has cut the forecast of cotton production in 2010/11 to 1 million 970 thousand tons (the previous forecast is 2 million 380 thousand tons). If Pakistan's cotton production is substantially reduced, the tight supply of the international cotton market will further intensify, which is likely to trigger a sharp rise in international cotton prices.

Historically, the December contracts in 1995 and 2003 lingered for 95 cents and 85 cents respectively. This does not mean that the bull market of ICE futures is coming to an end, but cotton prices may gradually transition to a consolidation period, and the rally will not be regained in the two or three quarter of next year. Nor can the expectations be too high, because the fundamentals of the cotton market remain strong.

　 Cotton prices enter high-risk areas

Due to continuous rainy weather, cotton picking has been delayed for about two weeks, and the quality has declined. India has temporarily suspended cotton exports and Pakistan cotton has been affected. These factors lead to the market's view that the global cotton supply and demand will be reduced to the direction of inventory reduction in the coming year. The unanimous expectations of the market triggered a surge in cotton prices during the Mid Autumn Festival: the price of dumping and storage rose by nearly 3000 yuan / ton, and the new cotton purchase price hit 25000 yuan / ton, and the imported cotton with its quota (next year after the Spring Festival) cost more than 21000 yuan / ton.

Looking back on the cotton bull market launched in November 2008, it has been 23 months now. The change of global cotton supply and demand is the key reason for the soaring cotton prices. The rising prices of global agricultural products are raising the price of cotton prices. This year, the prices of global agricultural products continue to rise, of which cotton is in the lead, while China's external dependence on cotton is around 1/3. The international cotton price boosts domestic cotton prices, making cotton prices difficult to get rid of the impact of global agricultural prices. This year's demand for cotton textile products at home and abroad is relatively strong. This is the main reason for pushing up cotton prices: from 1 to August, textile and garment exports increased by 125 billion 200 million, up 23.8% from the same period last year. From 1 to July, domestic textile and clothing wholesale and retail sales grew by 23.8% year-on-year, and the growth rate basically reached the level before the crisis. The rapid recovery of demand is also the main reason for the rise in cotton prices. In the different stages of market interpretation, there are three characteristics throughout: first, the spot price rise of cotton is ahead of the futures price, and the spot price is higher than the futures price at most of the time; two, the price of American cotton rises more than the domestic cotton price, the annual average value of cotton price difference between home and abroad is lower than that of previous years; three, cotton yarn price is closely linked with cotton prices, and the price difference is the highest level in the past 17 years. {page_break}
 

　 Supply and demand of cotton is still uneven.

Judging from the output of cotton in the new year, the sowing area this year may decrease slightly compared with last year. Cotton yields are likely to show a low level this year. Therefore, affected by weather disasters and farmers' willingness to grow, the output of cotton will not improve significantly this year, and there may even be a reduction in production. From the supply side, the shortage of domestic output will support the price of cotton market. We can see that the growth of domestic and foreign textile sales can be found that the growth of domestic demand and external demand for textiles is relatively stable. The imbalance between supply and demand of cotton comes from the fluctuation of supply rather than the change of demand. For this year, the downstream demand for cotton has maintained a steady growth, while the decline in cotton yield and a small reduction in sowing area has become a key factor directly driving the rise in cotton prices.

In recent years, the supply situation of cotton is not optimistic. However, the consumption of downstream cotton continues to thrive. The continued recovery of the textile industry in the first half of this year undoubtedly highlights the shortage of domestic cotton supply. Retail sales of domestic textiles have been growing steadily over the past 5 years, with an average annual growth rate of 23%. From the growth rate of cloth and yarn production, except for the negative growth in 2009, the average annual growth is more than 10% per year. In terms of external demand, the recovery of textile exports also supported the demand for cotton. In most months of the first half of the year, the export volume of textiles increased by more than 30% over the same period. Monita textile export research also shows that some textile exporters said that the order production has been in October, so cotton consumption is expected to remain strong in the short term.

Because China always needs to import cotton to replenish domestic demand all year round, China's cotton stocks do not have sufficient regulatory capacity. Besides inventory, the two factor that can regulate China's cotton supply end is China's output and imports. China's output of new cotton will tend to be tense. In the past, the fluctuation of domestic cotton output has a significant impact on cotton prices in the next year. As the cotton product in 2010 is still difficult to improve, the new cotton market has a weaker effect on price rise.

　 National reserves failed to lower cotton prices

Since the second half of this year, the State Reserve has repeatedly announced that it will put the cotton prices in a bid to stabilize domestic cotton prices, but has yet to take action. In August 10th, the State Reserve began to put in 600 thousand tons of cotton reserves. In September 27th, the China Cotton Association said it would add 400 thousand tons of cotton reserves. But when the State Reserve is only less than 300 thousand tons, the US cotton speculation on China's imports of cotton has become increasingly fierce.

At the current time, the stock supply of state reserves is expected to ease the demand gap for short-term textile cotton. It may also be based on the new cotton's listing in October to provide new supply, which will increase the supply pressure of cotton in the new year. In addition, the current state reserve auction will trigger the need to re-establish reserves in the late stage, so it will only shift the current supply pressure to next year.

　　 US cotton innovation high supports domestic cotton prices

China's demand is increasing, the US dollar is falling, and the US's domestic fundamentals are pressing to make New York's cotton futures break through 100 cents. In the short term, there is no possibility of a big pullback in the market. First of all, the low temperature and rainy weather in the main cotton producing areas in China will affect the cotton yield and quality. The market generally believes that the demand for cotton imports will increase in the coming months. At present, the US Department of agriculture predicts that China's cotton imports will reach 2 million 720 thousand tons in 2010/11, the second highest in history. Second, the fall in the US dollar also stimulated cotton prices to increase, and this year's outlook for us cotton exports continued to look good. Recently, the US dollar fell to a 15 year low against the yen and the US cotton export volume reached the highest level in the same period. USDA expects us cotton exports to be 3 million 266 thousand tonnes this year. Judging from the current situation, this forecast is also possible to further increase. Thirdly, although the fundamentals of cotton in the United States have significantly tightened up in the past year and a half, the future may be even tighter. The US Department of agriculture is expected to continue to increase US consumption and exports in the forecast for September. The end inventory will also continue to decline, and the inventory consumption ratio will drop to a 15 year low. Finally, the net bull interest rate of ICE futures continued to increase, and the unpriced sales contract reached an all-time high level, which provided an opportunity for cotton prices to rise. Although technical indicators show that ICE futures market has overbought, the above positive factors will prevent a sharp callback of cotton prices.

International cotton prices have also hit a 10 year high since 2010, and the recent rise in international cotton prices. China is the biggest buyer in the world. Once China starts to increase imports, the price of international cotton will probably rise further. Meanwhile, the global cotton supply and demand situation continued to tighten in 2011. According to USDA estimated data, the global demand for cotton is still larger than cotton production in 2011. Although the government is expected to sell cotton reserves in the near future, the tight supply of cotton for two consecutive years is still the decisive factor. After the inventory auction is finished, the certainty of the tight cotton output in the new year will be more obvious.

　 Strong demand in emerging markets

Emerging economies such as China and India have entered the middle and late stages of industrialization. Agricultural development has shown profound changes: first, the price of agricultural labor has risen significantly; two, land prices have risen significantly; three, the living standard of residents has been increasing after the acceleration of urbanization. The acceleration of cost increase and the rigid growth of demand will drive the price cycle of agricultural products to increase rapidly, and its comprehensive speed will increase from 5% in the past 10 years to about 10%.

After China, India and Pakistan are the second and third largest cotton consuming countries in the world, as well as second and third major cotton textile producers. Textile output accounts for 14% of India's total industrial output, and textile exports account for 30% of India's total exports. The textile industry is the pillar industry and the largest export industry in Pakistan. The number of employees is 19 million, accounting for 38% of the total number of manufacturing jobs. The output value accounts for 46% of the output value of the manufacturing industry, and the contribution rate to GDP is 8.5%. Textile exports account for 50% of the total export trade, reaching 67% at the highest. Pakistan's exports of cotton yarn and cotton cloth rank the highest in the world, and its share in the international market is 30% and 8% respectively. In 2009 and 2010, the policies of India and Pakistan to revitalize the downstream textile industry were frequent, so there was great potential for cotton consumption growth in the two countries in 2010/11. There is one particular concern. While developing the downstream textile industry, the two countries also introduced policies to restrict the export of cotton and cotton yarn, so as to ensure the demand for cotton and cotton yarns in the downstream textile industry. The cotton yarn produced in India and Pakistan is cheap and inexpensive, and is very popular in the international market. The two countries have restricted the export of cotton and cotton yarns, which will inevitably lead to tight supply of cotton and cotton yarn in the international market, and prices will rise.

In addition, the Pakistan Textile Mills Association said the floods resulted in nearly 380 thousand tons of cotton production in Pakistan. It is estimated that the country needs at least 680 thousand tons of cotton in 2010/11 to meet the demand for textile cotton. At present, Pakistan official has cut the forecast of cotton production in 2010/11 to 1 million 970 thousand tons (the previous forecast is 2 million 380 thousand tons). If Pakistan's cotton production is substantially reduced, the tight supply of the international cotton market will further intensify, which is likely to trigger a sharp rise in international cotton prices.

We believe that supply and demand is the core element of cotton prices. Dumping and expanding import quotas on the surface can not inhibit the rise of cotton prices, but the autumn Canton Fair in October has a greater impact on textile enterprises' new annual orders, and if the downstream can not accept the rise in cotton prices and the appreciation of the renminbi, the trend may be reversed. Historically, the December contracts in 1995 and 2003 lingered for 95 cents and 85 cents respectively. This does not mean that the bull market of ICE futures is coming to an end, but cotton prices may gradually transition to a consolidation period near 100 cents, and the rally will not be regained in the two or three quarter of next year. Nor can the expectations be too high, because the fundamentals of the cotton market remain strong. Once the price difference between 32 spun yarns and cotton is kept below 5000, high cotton prices will be reduced by reducing the capacity of downstream production. At this time, the risk of raw material prices in cotton industry needs to be hedging with appropriate amount of futures hedging positions.