The “changing face” of the cotton market stimulates the enthusiasm of enterprises to participate in futures
Abstract: In recent years, the decline in domestic cotton planting area and output has gradually emerged, and insufficient production has become the norm. The shortage of raw material resources and rising labor costs have triggered the transfer of cotton downstream industries to major cotton producing areas and areas with low labor costs, and the market structure is undergoing major changes. These changes have increased the linkage between domestic and foreign cotton markets, and the allocation of market resources has become more diversified. Industrial enterprises have a greater need to use futures and other financial tools and platforms to avoid risks and stabilize operations
Key words:
In recent years, domestic cotton planting area and output have gradually declined, and insufficient production has become the norm. The shortage of raw material resources and rising labor costs have triggered the transfer of cotton downstream industries to major cotton producing areas and areas with low labor costs, and the market structure is undergoing major changes.
These changes have strengthened the linkage between domestic and foreign cotton markets, made market resource allocation more diversified, and made it more urgent for industrial enterprises to use futures and other financial instruments and platforms to avoid risks and stabilize operations. In addition, cotton yarn futures are expected to be listed, and the cotton industry futures variety series will be improved, which will further stimulate the enthusiasm of real enterprises to participate in the futures market, and the futures market’s ability to serve the real economy will be greatly improved.
1. Insufficient cotton market production needs to be normalized
In recent years, my country’s cotton planting area has declined significantly. Many farmers in traditional cotton-producing areas no longer grow cotton, resulting in my country’s cotton output declining year by year.
At present, insufficient production and demand in the domestic cotton market have become normal, and as the planting area in producing areas further shrinks, this market development trend has become more serious. After the state cotton reserve was digested, domestic cotton market demand had to rely on large quantities of imported cotton to meet the demand, and a new market development environment has basically been formed.
At the “2016 Shijiazhuang Cotton Industry Forum” held recently, Yongan Futures cotton researcher Kuang Bo told reporters that what the market is worried about now is that in 2-3 years, when the state reserves of cotton are digested After that, even if the domestic cotton price rises to close to the production cost, or even higher than the cost, the cotton planting area in the mainland may not be able to recover quickly.
“If the planting area in inland areas cannot be restored by then, how will the large production and demand gap in the domestic cotton market be filled? If cotton output remains stable at the current level in 2-3 years, it will not We rule out the possibility of a sharp rise in cotton prices in the future,” Kuang Bo said.
According to the reporter’s understanding, my country’s current annual cotton output remains at about 4.5 million tons, and the annual market demand is about 7.5 million tons. There is a supply gap of about 3 million tons in the domestic market every year. Mainly Rely on the state reserve cotton sales and imported cotton to make up for it.
Market agencies predict that if domestic cotton production continues to decline in the next few years, coupled with changes in weather and export policies in major cotton-producing domestic areas in the international market, the textile industry in India and other countries will develop rapidly. Domestic cotton supply will become increasingly tight. Against the background of normalized production shortages, the domestic cotton downstream industry often faces pressure from fluctuations in raw material prices, which is not conducive to the long-term stable development of the industry.
“Cotton price and supply influence each other. Since 2015, cotton production has been lower than consumption, unfinished stocks have been declining, and the inventory-to-consumption ratio has been lower.” Kuang Bo said, from cotton Judging from the overall pattern of market supply and demand, the probability of cotton prices showing a strong oscillation is relatively high, and there will be no obvious downward trend in the market. Analyzing the small cycles of supply and demand changes in the cotton market, the rise and fall of cotton prices depends on the fluctuations in the periodic supply and demand relationship, because cotton is harvested in one season for use throughout the year.
As of now, domestic cotton commercial inventories and industrial inventories are at the lowest level since 2010. The yarn inventory pressure is significantly greater than the gray fabric inventory pressure, which deserves market attention. At the same time, the variable in my country’s cotton consumption lies in the change in the price difference between domestic and foreign prices. In addition, judging from the changes in monthly import volume of yarn import source countries, Vietnamese yarn has grown rapidly in recent years, Pakistani yarn has been stable, and Indian yarn has declined rapidly.
Kuang Bo believes that if the domestic cotton market demand remains at around 7.5 million tons, it will be calculated based on the estimated domestic cotton production, import volume, and state reserve cotton sales so far this year. , before the state reserve cotton starts to be rotated out in March next year, the domestic cotton market stock will be enough to meet demand.lass=”MsoNormal”> In addition, many unexpected factors will also cause major changes in market supply, which will eventually be reflected in price changes.
Recently, although the advantage of domestic yarn compared with imported yarn has declined, the sales of cotton downstream products such as gray cloth and fabric products have shown signs of decline, and the domestic cotton market supply is also expected to be relatively loose, but cotton prices It still continues to strengthen, mainly because Xinjiang cotton is difficult to transport to foreign countries, mainland cotton farmers are reluctant to sell, and freight rates have increased significantly. At the same time, a large amount of social hot money poured into the futures market and pushed up commodity futures prices in turn. Last weekend, Zheng cotton futures prices went from the upper limit to the lower limit in a short period of time, which further shows that market emergencies have a greater impact on cotton prices.
At present, just looking at the pattern of the domestic cotton yarn market, the changes are not only great, but also relatively complex.
The reporter learned at the above forum that Xinjiang yarn, mainland yarn, and imported yarn have formed a “three-legged” pattern in the domestic cotton yarn market. The market share of the three will increase with the production cost. There have been major changes in the situation, which will have an impact on enterprises in the upstream, midstream and downstream cotton industries. Enterprises must consider changes in these market factors when formulating production plans and pricing strategies.
According to the reporter’s understanding, before the implementation of the cotton target price policy, imported cotton and imported yarn dominated the domestic market. The price advantage once allowed imported cotton and imported yarn to “rampage” in the domestic market. However, as the cotton target price policy comes into effect, the prices of domestic cotton and domestic yarn have plummeted, and the domestic cotton and cotton yarn markets have quietly changed. For many years, the market structure of the domestic medium and low yarn market dominated by imported yarn no longer exists, and has been replaced by It is Xinjiang cotton and Xinjiang yarn.
However, since the second half of this year, the prices of domestic cotton and domestic yarn have been high, and imported cotton and imported yarn are full of confidence in entering the domestic market. The output and cost of Indian yarn, Vietnamese yarn, and Pakistani yarn will also have a greater impact on the domestic market.
Customers from 3 industries are more enthusiastic about participating in futures
In 2004, cotton futures contracts were listed for trading on the Zhengzhou Commercial Exchange. In the blink of an eye, more than ten years passed quickly.
During this period, my country’s annual imports of cotton and cotton yarn doubled. The downstream cotton industry moved to Xinjiang, the main domestic production area, and to areas with rich labor resources, such as Southeast Asia. Domestic cotton, The situation where domestically produced yarns and state-owned cotton dominate the world no longer exists. At the same time, the economic environment has undergone major changes, and “black swan” events have occurred frequently. Many cotton-related companies have fallen into a quagmire of losses and cannot extricate themselves.
At a time when the market is changing, the linkage between domestic and foreign cotton markets has increased, and market resource allocation has become more diversified. Who among cotton-related companies will use futures and other financial instruments and platforms to avoid risks? Who can better achieve stable operations.
At present, Zheng cotton futures prices have become the benchmark for the domestic cotton market, and the correlation coefficient between futures and spot cotton prices is very high. Entity companies in the industry chain have developed very mature trading models such as product sales, raw material procurement, hedging, and arbitrage through the flexible use of futures tools. The Zhengzhou cotton futures market and the domestic cotton industry have worked together in the past 13 years and achieved a win-win situation. Market participants believe that the future development of the domestic cotton industry will require further integration of the Zheng cotton futures market with the entire industry.
The relevant person in charge of the Zhengzhou Commercial Exchange said that in recent years, the number of corporate customers participating in the Zhengzhou cotton market has continued to increase, and the trading volume and positions have increased steadily. The investor structure of the Zhengzhou cotton futures market Continuous improvement.
According to the reporter’s understanding, in 2010-2011, when the domestic cotton market was less affected by policies, Zheng cotton futures market transactions were more active, but the investor structure still needs to be optimized. Data show that in 2010, Zheng Cotton’s average daily trading volume was 350,000 lots, and its average daily position was 180,000 lots; in 2011, its average daily trading volume was 570,000 lots, and its average daily position was 250,000 lots.
From 2012 to 2013, with the adjustment of market policies, the average daily trading volume and open interest in the Zhengzhou cotton futures market gradually declined. From 2014 to now, with the implementation of the cotton target price policy, the development of Zheng cotton futures market has entered a new stage. The average daily trading volume and open interest have continued to rise. The average daily trading volume that year was 130,000 lots and the average daily open interest was 200,000. As a result, the market investor structure began to undergo major changes. By 2015, Zheng Mian’s average daily trading volume was 90,000 lots, and his average daily position was 250,000 lots.
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AAAIn 2015, Zheng Cotton’s average daily trading volume was 90,000 lots, and its average daily position was 250,000 lots.
Disclaimer:
Disclaimer: Some of the texts, pictures, audios, and videos of some articles published on this site are from the Internet and do not represent the views of this site. The copyrights belong to the original authors. If you find that the information reproduced on this website infringes upon your rights, please contact us and we will change or delete it as soon as possible.
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