Cotton City “changing face” stimulates companies to participate in futures enthusiasm

In recent years, the situation of the decline in the area and output of domestic cotton has gradually emerged, and the need for insufficient production has become normalized. Shortage of raw material resources and rising labor costs have led to the transfer of downstream cotton industries to major cotton producing areas and low-cost labor areas, and the market structure is undergoing major changes.

These changes have made the domestic and international cotton market linkage enhanced, and the market resource allocation has become more diversified. It is more urgent for industrial enterprises to use financial instruments and platforms such as futures to avoid risks and stabilize their operations. In addition, cotton futures are expected on the market, cotton futures industry series will be improved, which will further stimulate the enthusiasm of business entities in the futures market, futures market, the ability to serve the real economy will be greatly enhanced.

Cotton City “changing face” stimulates companies to participate in futures enthusiasm

1Insufficient production in the cotton market needs to be normalized

In recent years, China's cotton planting area has declined more, and many traditional cotton producing areas have stopped growing cotton, which has caused China's cotton production to decline year by year.

At present, the shortage of production in the domestic cotton market has been normalized, and with the further shrinkage of planting area in the production area, this market development trend has become more serious. After digestion State Reserve quilts, domestic cotton market demand had to rely heavily on imported cotton to meet the new market environment has been basically formed.

At the "2016 Shijiazhuang Cotton Industry Forum" held recently, Yongan Futures Cotton Researcher Li Bo told reporters that the market is worried that after 2-3 years, after the country's cotton storage is digested, even if domestic cotton prices rise to near production costs Even higher than the cost, the cotton planting area in the Mainland may not be able to recover quickly.

"If the planting area of ​​the inner real estate area is not restored, how can the domestic cotton market's large production and demand gap be compensated? If the global cotton production is still stable at the current level within 2-3 years, it will not rule out a sharp rise in future cotton prices. The possibility of the market." Libo said.

According to the reporter's understanding, the current annual output of China's cotton is 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 relying on the national cotton storage and imported cotton to make up.

Market institutions predict that, if the domestic cotton production over the next few years, still continued to decline, coupled with the international market, mainly cotton-producing area of domestic and export policies changeable weather, India and other countries in the textile industry is developing rapidly, the domestic cotton supply will become tighter. Under the background of the normalization of production, 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 are mutually influential. Since 2015, global cotton production has been lower than consumption. Global stocks have not been inventories, and stocks and consumption have fallen." Libo said that from the global cotton market supply and demand pattern, cotton There is a high probability that the price will show a strong oscillation, and there will be no obvious downward trend in the market. From the small cycle of supply and demand changes in the cotton market, the rise and fall of cotton prices depends on the fluctuation of the stage supply and demand relationship, because cotton is harvested for the whole year.

As of now, domestic cotton commercial inventories and industrial inventories have been at their lowest level since 2010. The yarn inventory pressure is significantly higher than the grey cloth inventory pressure, which deserves market attention. At the same time, the variable of cotton consumption in China lies in the change of the price difference between inside and outside. In addition, from the monthly import volume of yarn importing countries, Vietnam yarn has grown rapidly in recent years, Pakistani yarn is stable, and Indian yarn has fallen rapidly.

Libo believes that if the domestic cotton market demand remains at around 7.5 million tons, according to the current domestic cotton production forecast, import volume, and national storage cotton sales, this year, before the national storage cotton begins to rotate in March next year. The domestic cotton market stock is sufficient to meet the demand.

However, Libo reminds investors to pay special attention to the following issues:

First, the round of bids for the State Reserve Cotton is formulated based on the comprehensive international and domestic market prices. In the case of rising domestic and international market prices, the round-off price of the National Reserve Cotton will definitely increase in March next year, but it will be subject to reserve cotton stickers. The final purchase price of textiles, such as textiles, will be lower than that of new cotton.

Second, there are still more than three months from the reserve cotton round. If the Spring Festival holiday is removed, the production time of the enterprise will only be shorter, and it will become the purchasing strategy of most enterprises with the purchase and use. From this point of view, the new cotton gains are difficult to sustain.

Third, the replenishment of textile enterprises before the end of this year has a supporting effect on cotton prices. Although textile enterprises will not purchase cotton in large quantities, the normal production volume needs to be guaranteed. At present, there are few cotton resources in the Mainland. Most of the cotton resources are concentrated in Xinjiang. Although many cotton enterprises have purchased actions in Xinjiang, due to the tight railway transportation capacity and the increase in road freight rates, the probability of cotton price rising is relatively high.

"After a comprehensive analysis of domestic and international cotton market supply and demand situation, if China's imports of Indian cotton by 40% tariff clearance calculations, the cost of imports is 17500-17800 yuan / ton, Zheng cotton short-term top should be around 18,000 yuan / ton." Marina wave It is believed that the spot price of new cotton will oscillate between 14,500 and 16,500 yuan per ton before the sale of the national cotton in March next year.

Marina wave said that as the international cotton prices after a more substantial increase, and the probability of not falling, the new domestic cotton cost and quality factors also cause the price will be significantly higher than last year, the State Reserve cotton is expected to sell the reserve price will be higher. During the sell-off period, the supply and demand situation in the domestic cotton market will depend on the size of the domestic and international cotton market, which will eventually be transmitted to the yarn market and affect the change in yarn imports. Libo expects the average transaction price of the national reserve cotton in the new year to be around 14,500 yuan / ton. Taking into account the quality and cost support of new cotton, the mainstream operating range of Zheng cotton futures price is 15,000-15500 yuan / ton.

2 Domestic cotton industry pattern “changed face”

Recently, the spot prices of cotton at home and abroad have experienced significant fluctuations. Last weekend, Zheng cotton futures prices also showed a trend from the daily limit to the down limit. The reason is that the cotton market pattern at home and abroad is being re-adjusted. Many factors affecting the global cotton market, especially the domestic cotton market, are “face-changing”. If investors and cotton-related enterprises are not aware of these market changes, they may suffer considerable losses. .

The domestic cotton industry is changing. For example, the cotton planting area in the Mainland continues to shrink, but the Xinjiang cotton area is developing steadily, the cotton planting area is stable, cotton growth management, harvesting, etc. use a lot of new technologies, and scientific cotton planting is being vigorously promoted. In terms of sales, Xinjiang's production areas have also adopted many new models, using the futures market to sell at a fixed price and the basis sales have received good results.

The upstream, middle and downstream industries of cotton are shifting. For example, ginning factories, textile enterprises and garment manufacturing enterprises have not only transferred to Xinjiang producing areas, but also transferred to foreign countries. This has led to major changes in industrial employment, raw materials and product circulation, and product cost and price in the cotton industry chain will also fluctuate.

Li Yong, a cotton researcher at Hubei Baiyin Cotton Industry, said that according to the current domestic cotton market output, national cotton storage sales, imports, demand, etc., the domestic cotton market supply and demand will be in a tight balance in the next few years. Among them, in terms of supply, as the inventory of the national reserve cotton continues to decline and the domestic cotton planting area declines, the problem of insufficient supply in the future will become more and more serious, which may eventually lead to resource shortages in the market. On the demand side, the low-yarn yarn production capacity is transferred to Southeast Asia, which is in line with the policy orientation of eliminating high-pollution and high-energy textile production capacity in China. With the upgrading of products, domestic enterprises will dominate the global combing market, and the demand for cotton will be graded. At the same time, the total market demand will decline. Based on this calculation, the domestic cotton market supply and demand will decline simultaneously, and it is expected that there will be a phased shortage of high-grade cotton in China next year. However, at this stage, due to the excessive supply of new cotton at home and abroad, the market is facing greater sales pressure.

In terms of domestic cotton market supply, there will be at least three important supply variables in one year: one is the amount of new cotton in the year, the other is the quantity of imported cotton, and the third is the quantity of national reserve cotton entering the market. These variables tend to change a lot, and often even exceed market expectations.

For example, the increase or decrease in the quantity of imported cotton is not only affected by domestic cotton-related policies, exchange rates and other factors, but also by factors such as the increase and decrease of production and export policies of major international cotton-producing countries. Judging from the sales and transaction status of the national reserve cotton this year, the original market expectation of volume trading, smooth out of the warehouse, and guaranteed supply have not fully appeared. The inspection time in the bidding sales process is insufficient, and the ability to release the warehouse is insufficient. The price of cotton.

In addition, many sudden factors will also cause a major change in market supply, which will ultimately be reflected in price changes.

Recently, although the advantages of domestic yarns compared with imported yarns have declined, the sales of cotton downstream fabrics and fabric products have shown signs of decline. The domestic cotton market supply is expected to be relatively loose, but cotton prices continue to strengthen, mainly because Xinjiang cotton is difficult to The farmers and the mainland farmers reluctant to sell and the freight rate increased. At the same time, the social hot money flooded into the market and took turns to push up the commodity price. Last weekend, Zheng cotton's price in the short period of time from the daily limit to the down limit, which shows that the market sudden factors have a greater impact on cotton prices.

At present, from the perspective of the domestic cotton yarn market, the changes are not only large but also complicated.

The reporter learned at the above forum that Xinjiang yarn, inland yarn and imported yarn have formed a “three-legged” pattern in the domestic cotton yarn market. The market share of the three will change greatly with the change of production cost. Both middle and downstream industrial enterprises will have an impact. Enterprises must formulate production plans, pricing strategies, etc. to consider changes in these market factors.

According to the reporter, before the implementation of the cotton target price policy, imported cotton, yarn imports dominate the domestic market, the price advantage of imported cotton was to make imports of yarn in the domestic market "rampage." However, with the cotton target price policy playing a role, domestic cotton and domestic yarn prices have plummeted, and the domestic cotton and cotton yarn market has quietly changed. The market pattern dominated by imported yarn in the domestic medium and low yarn market has disappeared for many years. Instead, it has replaced it. It is Xinjiang cotton and Xinjiang yarn.

However, since the second half of this year, domestic cotton and domestic yarn prices have been high, and imported cotton and imported yarns are full of confidence in entering the domestic market. The production and cost of Indian yarn, Vietnamese yarn and Pakistani yarn will also have a greater impact on the domestic market.

3 industry customers participate in futures enthusiasm

In 2004, cotton futures contracts were listed on Zhengshang. With a flick of a finger, more than a decade has passed.

During this period, the annual import volume of cotton and cotton yarn in China has doubled, and the downstream cotton industry has shifted to Xinjiang, the main producing area in China, and to Southeast Asia, where labor resources are abundant. Domestic cotton, domestic yarn, and national cotton have dominated the world. No longer exists. At the same time, the global economic environment has undergone major changes. The "black swan" incident has frequently appeared, and many cotton-related enterprises have fallen into a quagmire of losses.

At a time when the market is changing, the linkage between domestic and foreign cotton markets has increased, and the distribution of market resources has become more diversified. Whoever involved cotton companies will use futures and other financial instruments and platforms to avoid risks, and who can better achieve stable operations.

At present, the price of Zheng cotton has become the wind vane of the domestic cotton market, and the correlation coefficient of spot cotton price is very high. Entity enterprises in the industrial chain have matured through the flexible use of futures tools for product sales, raw material procurement, hedging and arbitrage. The Zheng cotton period and the domestic cotton industry have helped each other 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 market and the entire industry.

The relevant person in charge of Zhengshang Institute said that in recent years, the number of legal entities participating in the Zhengmian market has been increasing, the trading volume and positions have risen steadily, and the investor structure of Zhengmian period has continued to improve.

According to the reporter's understanding, in the domestic cotton market, which was less affected by the policy, the Zhengmian period market was more active in 2010-2011, but the investor structure still needs to be optimized. According to the data, in 2010, ZhengMian's average daily trading volume was 350,000 contracts, and the average daily position was 180,000 contracts. In 2011, the average daily trading volume was 570,000 contracts, and the average daily position was 250,000 contracts.

From 2012 to 2013, with the adjustment of market policies, the average daily trading volume and positions of Zheng cotton market gradually declined. Since 2014, with the implementation of the cotton target price policy, the development of Zhengmian period has entered a new stage, and the average daily trading volume and positions have been rising. The average daily trading volume was 130,000 lots, and the average daily position was 200,000. Hand, the structure of market investors has begun to change a lot. By 2015, ZhengMian had an average daily trading volume of 90,000 lots and a daily average of 250,000 lots.

From the changes in the average daily trading volume and positions of Zhengmian, the long-term investors are increasing. The average daily trading volume in 2010 was 350,000 contracts, and the average daily position was only 180,000 contracts. The average daily turnover from January to October this year. The amount reached 350,000 hands again, and the average daily position reached 320,000.

"In recent years, domestic and international cotton prices and yarn prices have been relatively large, and the enthusiasm of industrial enterprises to enter the Zheng cotton market has been continuously improved, and the market turnover rate has also begun to rise." Zheng Shangsuo is responsible for telling reporters that with legal clients The enthusiasm for participation has been continuously enhanced. From January to October this year, the average daily turnover of corporate clients reached 111,000 contracts, and the average daily position was 132,000 contracts.

For cotton-related enterprises, the use of futures tools to make business operations more stable. According to industry insiders, Zhengmian Futures has played an important role in helping cotton-related enterprises to control risks and operate steadily. At this stage, many large and medium-sized ginning factories, textile enterprises, grey cloths and garment manufacturing enterprises in China have carried out hedging operations in the futures market. At the same time, many cotton and cotton yarn traders and importers are also using the futures market to avoid risks. .

The reporter interviewed some cotton-related enterprises and found that some cotton-related enterprises use the futures market as a tool to effectively resist the risk of large fluctuations in cotton prices. The ability of enterprises to withstand the risk of price fluctuations is significantly enhanced and the operating efficiency is improved.

4 industry chain expects cotton yarn futures to go public

At present, Zhengshang is actively promoting the market for cotton yarn futures. Industry professionals believe that if the cotton futures, for the entire cotton textile industry chain will be a major positive. The cotton textile industry chain involves a large number of enterprises, and the price transmission mechanism between cotton, cotton yarn and downstream end products is very complicated. If you do not take the initiative to use the hedging function and price discovery function of the futures market, the operation of textile enterprises will be very passive.

“The listing of cotton yarn futures can benefit textile companies in many ways.” The representatives of cotton-related enterprises participating in the forum believe that the uncertainty of upstream cotton raw material prices and downstream cotton yarn orders has caused textile companies to have a large exposure. Through the combination of cotton futures and cotton yarn futures, the uncertainty of the textile enterprises in operation will be greatly reduced. In addition, the use of spot arbitrage operations can greatly reduce business risks. Textile companies are buyers of cotton raw materials and producers and sellers of cotton yarn and grey cloth products. By using the basis operation, the risk can be minimized and the profit can be locked in advance.

In addition, cotton yarn futures can also help companies to rationally arrange production plans. At present, most textile companies arrange production according to orders. Once the market orders are not satisfactory, the business will be in trouble. After the cotton yarn futures are listed, the textile enterprises can sell the cotton yarns for long-term delivery in advance, which can guarantee the continuity and stability of production.

On the whole, the market environment of domestic cotton and its downstream products is undergoing major changes. The linkage between cotton and its products market at home and abroad has been strengthened. Cotton-related enterprises have combined operations in various ways in the spot market at home and abroad. The allocation of resources is more diversified. At the same time, the market's demand for futures business innovation is even more urgent. The industry expects that with the cotton yarn futures listed in the future, the cotton industry futures variety series will be improved, the function of the cotton futures service real economy will be greatly improved, and the Zheng cotton period is expected to usher in a new stage of development.

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