Futures Daily: Cotton Is Concerned About Policy Trends

The near future,

High price consolidation, waiting for policy guidance

At present, domestic cotton prices remain basically stable. Under the game of supply and demand sides, the market has reached a balanced state, showing a "peaceful" scene.

With the steady progress in the collection and storage and the gradual increase of cotton reserves, the cotton resources in the market (especially high-grade cotton) are decreasing day by day. The upward trend of cotton prices has been accelerated at the end of March, but about a month later, the fast rising trend has been curbed and the cotton prices have stabilized at a high level.

National cotton price index

Out of concern about the trend of the market after throwing and storing, cotton enterprises' confidence in storing cotton has been suppressed during this period, and shipments will be enhanced.

It is understood that as of May 14th, many cotton enterprises have shipped out, basically in the state of zero inventory.

In addition, enterprises reflect that Xinjiang cotton is being pported to the mainland gradually. These two factors have increased the market supply to a certain extent.

In terms of textile enterprises, there are rumors of state dumping in the market. The wait-and-see psychology of textile mills is aggravating, and the procurement of raw materials is not positive. On the other hand, the operation of textile mills has not improved significantly, and the problem of capital shortage has never been solved. This is why cotton prices are weak.

The market is cautiously wait-and-see about the current cotton price, waiting for the relevant measures such as the throwing and storing scheme and the issuance of the import quota of foreign cotton. The macro-control measures will indicate the direction of the cotton price trend in the later stage.

Cotton and yarn production increased year by year, textile and clothing exports are still not optimistic.

According to the latest data released by the relevant state departments, there are signs of warming in the domestic cotton textile industry.

Specifically, cotton and yarn production increased by 1.82% and 9.9% respectively in April this year, while the cumulative output in 1-4 months increased by 0.06% and 8.1% respectively.

Under the impetus of large-scale economic stimulus, our country's foreign trade surplus, real estate and car sales, new project plan investment have rebounded, the market generally believes that China's economy has entered the track of oscillation.

According to the data released by the National Bureau of statistics in May 13th, the added value of Industrial Enterprises above Designated Size in April increased by 7.3% over the same period last year.

Although the growth rate dropped by 1 and 8.4 percentage points respectively from last month and the same period last year, it was significantly higher than the 5% of the end of last year and the growth rate of less than 4% at the beginning of this year.

"The growth rate of industrial added value in April is slower than that in March, which does not mean that the industrial situation is deteriorating. In fact, China's industrial production is now in a process of oscillating rise."

Zhang Yongjun, a researcher at the National Information Center's Economic Forecasting Department, said.

Despite the recent macroeconomic and industrial data, our economic situation has improved, but the export prospects of textile and clothing are still not optimistic.

According to the latest statistics from the General Administration of Customs of China, the export volume of textiles and garments in China in April this year was 12 billion 493 million US dollars, an increase of 2.70% over the same period, but a decrease of 12.55% over the same period last year.

Among them, exports of textiles (including textile yarns, fabrics and articles) amounted to US $5 billion 121 million, down 14.40% compared to the same period last year. Exports of garments (including garments and accessories) were US $7 billion 372 million, down 11.22% from the same period last year.

The 105th Canton Fair is also unsatisfactory.

According to Mu Xinhai, Deputy Secretary General of the Canton Fair and spokesman of the press conference, at the closing ceremony in May 7th, 165436 overseas purchasers from 209 countries and regions were present at the Canton Fair, reducing 9126 people by 5.2% compared with the previous one.

In addition to the decrease of merchants, export pactions also contracted to a certain extent.

Mu Xinhai introduced that the export volume of the 105th Canton Fair was US $26 billion 230 million, a decrease of US $5 billion 320 million over the previous session, with a reduction of 16.9%, of which 3 billion 230 million US dollars for textile and clothing decreased by 11.7%.

Outlook for the future

Due to the large number of cotton resources in 2008/2009, the effective supply of domestic cotton market is insufficient.

According to the statistics of the national cotton market monitoring system, the reserves of Xinjiang cotton are only 4.5 million tons, and if the textile cotton is basically stable in the late stage, the only policy that can reverse the market situation is that cotton prices are stabilizing at the expectation of the policy.

Compared with the domestic market, the export environment of textile and clothing is more worthy of our concern, because the macroeconomic is still facing downward pressure.

Based on the above analysis, we believe that industry policy is the main influencing factor of the domestic cotton price trend. It is expected that the latter will remain stable or oscillatory upward. After all, ensuring the farmers' income and ensuring the stable development of the industry are two important aspects of the government's consideration.