Domestic cotton storage has always been a weight to suppress prices

Against the background of insufficient cotton production in the market, the postponement of the State Reserve’s cotton storage directly detonated the market. Insufficient supply in the spot market drove cotton to rise linearly. Afterwards, the public inspection of the State Reserve’s cotton was slow and Reasons such as limited quantity, difficulty in getting out of warehouses, and traders’ stockpiling have provided impetus for cotton prices to continue to rise. In addition, under the loose monetary environment, the continued inflow of funds into the commodity market is another reason for the rise in cotton prices.

The rise in cotton prices starting in September this year is more driven by funds. After the Mid-Autumn Festival and the National Day, property market control policies were introduced one after another, and the property market began to cool down. Correspondingly, there was a booming commodity market. In addition, In the RMB depreciation cycle, cotton as a daily necessity undoubtedly has its natural advantages. Although the completion speed has slowed down, the upward trend of cotton prices is relatively clear. As for the cotton market in 2017, these two conditions that drove cotton prices to rise still exist.

According to statistics from Tianxia Granary, domestic cotton consumption in 2015/16 was 7.64 million tons, output was 4.9 million tons, imports were 980,000 tons, and the supply and demand gap reached 1.76 million tons. The total volume of sales of state cotton reserves this year was 2.6592 million tons, effectively making up for the gap in supply and demand this year. For 2016/2017, it is estimated that domestic cotton consumption will be 7.56 million tons, production will be 4.61 million tons, and import volume will be 900,000 tons. The gap between supply and demand will be 2.05 million tons. However, storage sales will continue to be arranged in the new year to ensure cotton supply.

For the foreign cotton market, according to the December production demand forecast report of the United States Department of Agriculture (USDA), cotton production in 2016/17 was 22.695 million tons, consumption was 24.363 million tons, and the ending inventory was 19.409 million tons. , including cotton production outside China of 18.123 million tons, consumption of 16.582 million tons, and ending inventory of 8.991 million tons. The inventory-to-consumption ratio has declined for two consecutive years after reaching a new high in 2014/15. However, except for China, the inventory-to-consumption ratio is basically stable and is expected to rise slightly in 2016/17.

Since China has a cotton import quota system, that is, the quota within the 1% tariff is 894,000 tons, and the excess is subject to a sliding tax and basically no quota. In addition, the sell-off due to the still high state reserves Due to the reserve policy, the direct linkage between the domestic market and the international cotton market has weakened, and cotton supply will be slightly loose in the new year except for China. However, India and the United States are big variables in the market. The United States focuses on crop value comparison, while India’s cotton production relies heavily on the adequacy of monsoon rainfall. It is also necessary to pay attention to the substitution effect of China’s cotton yarn imports on cotton. But overall, cotton is still in the destocking cycle. Although consumption may not grow significantly in the past two years, cotton prices will still be a process of shifting the focus.

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