The new pricing model makes national cotton reserves to inventory more market-oriented

Since May 2016, the Chinese go to inventory. New pricing model for national cotton reserves to stock more market-oriented, which makes the cost of domestic cotton rapidly to international, troubled domestic textile enterprises for 4 years the cost of the barrier to be broken. The domestic textile enterprises therefore to respond and vitality. This paper revolves around to inventory of cotton yarn of both at home and abroad, for the purpose of this year and next year China's cotton supply and demand situation in-depth analysis.

A Chinese enterprise competitiveness

In May 2016, a new round of national cotton reserves round out late in the eagerly anticipated by his domestic enterprises. Different is that this round of the bidding price is no longer a fixed price, but the average price of take the domestic cotton prices and international cotton prices as bidding price. Market-oriented pricing for domestic enterprises to integrate with the international cotton prices, cost reduced quickly to cotton level, low cost as to our country textile enterprises played a needle cardiotonic, domestic textile industry quickly restored the vigor and vitality, recovered part of the middle and lower yarn market losses.

The graph is cotton prices at home and abroad to spread (yuan/ton)

The graph is cotton prices at home and abroad to spread (yuan/ton)

The picture shows China's cotton monthly net import quantity (mt) < a target = "border =" 1 "height =" 224 "SRC =" http://i5.hexun.com/2017-07-11/189988470.jpg "width =" 399 "/ >

The picture shows China's cotton monthly net import quantity (mt)

Summarizes the national cotton reserves round out the experiences and lessons of 2016, 2017 national cotton reserves wheel running smoothly, market-oriented pricing advantages highlighted. Can be seen since March 2017, the national cotton reserves clinch a deal price and international cotton price stability within + / - 500 yuan/ton, both at home and abroad applied cost price difference is smaller and more stable than one year, which greatly improves the competitive edge of textile enterprises in China.

Stop import yarn follow further controlling China's market, in the past two years, during the national cotton reserves on the cotton net imports all appear to drop significantly. In September 2016, in May of 2017, China's net import 1.2 million tons of cotton yarn, fell by 100000 tons, 7.7% damping.

B domestic cotton consumption growth

If national cotton reserves cost reduction for the domestic textile enterprises occupy a favorable position, then India in November 2016 to implement the policy of "waste money" to the cotton market is and the slow progress. The above advantages make our country in the first nine months of this year's cotton imports fell by 100000 tons, this means that the fall in consumption, according to the proportion of 1.1 tons of cotton yarn production conversion, 110000 tons of cotton consumption in China will increase.

And through the calculation of cotton apparent consumption in our country, in the first nine months of this year our country cotton consumption increment is greater than 110000 tons. In September 2016 to May 2017, our country cotton apparent consumption amounted to 6.6123 million tons, 782300 tons of year-on-year growth. So in the first nine months of this year's cotton consumption growth is by no means confined to the yarn for imports.

The picture shows China's monthly apparent consumption of cotton (ten thousand tons)

The picture shows China's monthly apparent consumption of cotton (ten thousand tons)

For all things if there is a cause. In September 2016, in May 2017, our country cotton production of 30.149 billion meters, than the same period last year increased by 1.678 billion meters, growth of 5.89%. In addition, the use of cotton fiber in our country accounted for in November 2016, after also has a substantial improvement. Before November 2016, cotton fiber in three big fiber (cotton fiber, synthetic fiber, synthetic fiber) use the proportion fell to 25%, but the situation be reversed in December 2016, a significant increase in the amount of cotton fiber in the textile, accounted for 8% to 8%. So we expect 2016/2017 cotton consumption caused by the cotton yield increases with the increase in 600000 tons.

C short-term demand is expected to decline, medium-term supply and demand balance

Table for China's cotton supply and demand balance situation (ten thousand tons)

Table for China's cotton supply and demand balance situation (ten thousand tons)

According to the above analysis, this year's cotton consumption can probably do a judgment. Optimistic, if domestic yarn in the next three months remained on imported yarn competitiveness, imported cotton growth can maintain at 7.7% level, which will bring to our country cotton consumption about 143000 tons of increment. If the cotton yield also keep 5.89% growth, cotton fiber using proportion remained at 33%, can bring 600000 tons of cotton consumption increment.

So optimistic forecasts this year's cotton consumption in China can reach 8.43 million tons. In September 2016, in May 2017, cotton consumption in China has reached 6.61 million tons, so cotton consumption in China is expected in the next three months of 1.82 million tons, 610000 tons per month on average, than in the first nine months of monthly average consumption dropped by 120000 tons.

In the case of normal round out the national cotton reserves, 2017/2018 cotton in our country is still a balance between supply and demand is a little loose.

Consumers: policy support guarantee demand for cotton in xinjiang

Since 2015 the state council issued "about support the development of the textile and clothing industry in xinjiang to promote employment guidance" (hereinafter referred to as opinions), xinjiang textile industry developing rapidly. The pointed out that the 2015-2017 years for the development of the first stage, the cotton spinning production capacity up to 12 million pounds, cotton on the conversion rate of 20%. The second phase, from 2018-2018 cotton spinning production capacity up to 18 million pounds, remain at around 26%, cotton in situ conversion control the viscose production capacity 900000 tons. Is associated with the local government subsidies in the round to the textile industry, in addition to interest loans, staff training, subsidies subsidies, social security and freight, when inside and outside the cotton price difference is too large when using XinJiangMian textile enterprises in xinjiang will be awarded 800 yuan/tons of cotton subsidies.

At present in xinjiang cotton on the conversion rate of about 25%, basic to achieve the goal of the second stage. With the support of relevant policies, the competitive advantage of xinjiang cotton and industrial profits will be greatly guarantee, so we expect 2017/2018 annual demand for cotton textile industry in xinjiang to maintain in 1 million tons.

The graph is cotton futures price at home and abroad (yuan/ton)

The graph is cotton futures price at home and abroad (yuan/ton)

The mainland's cotton consumption affected by poor cotton expand inside and outside, will appear back slightly. At present zhengzhou and ICE cotton futures forward price has risen to 2000 yuan/tons. In the United States and India under the condition of new cotton production and listed in a timely manner, in September 2017 to February 2018, the high price will weaken the competitive edge of textile enterprises in mainland China so cut demand for cotton mainland 60000 tons to 7.4 million tons.

Supply side: planting area increased slightly

According to the national cotton market monitoring system on 21 June report released by the national cotton ShiBo area, 2017 national cotton ShiBo area of 47.573 million mu, year-on-year increase of 3.728 million mu, 8.5%, 3.3% increase from march intention survey results. Among them, the xinjiang cotton ShiBo covers an area of 31.629 million mu, 2017 year-on-year 8.9%; The Yellow River basin area increased by 8%; The Yangtze river area increased by 5.8%. XinJiangMian is expected to total 4.19 million tons, the mainland total output of cotton 880000 tons, the total output of cotton 5.07 million tons, year-on-year increase of 200000 tons, 4.1% increase.

To the end of June, the xinjiang cotton plants generally in 70-100 cm tall, cotton growth condition overall is good, growing and uniformity is better than that of last year.

Influenced by internal and external poor cotton prices higher, cotton imports in China is expected to increase, thus increase imports 50000 tons to 1.1 million tons.

National cotton reserves in the New Year is still is an important tool to adjust market supply and demand. After China's national cotton reserves on the end of 2015, China national cotton reserves inventory about 11 million tons. 2016 rings out of the deal of 2.04 million tons, in 2017 is expected to wheel out 3.1 million tons, in 2018 is expected to wheel out of 2.5 million tons. If not to turn into, to the end of the 2017/2018, China national cotton reserves stocks would drop to 3.36 million tons, the national cotton reserves stabilize the market, improve the effect of China's textile competitiveness will be weakened.

In 2017/2018 international inventories, under the background of Chinese stocks fell, when inside and outside cotton price difference is too large, round into the part of the imports of cotton as the possibility of reserves increase, on the one hand can make the inside and outside the cotton is poor convergence, on the other hand can adjust the structure of state reserve cotton quality inventory. According to no more than year round out 30% of the total measurement, imports of cotton round into the maximum size of around 900000 tons.

D international cotton prices affect domestic supply and demand

As stated earlier, the national cotton reserves round out the mechanism of the normalized effective to resolve the contradiction between supply and demand of domestic cotton market, stabilize the market expectations. Directly contacted with the bidding price and international cotton prices, this should be in constant change strategy to boost the domestic textile enterprises gain competitive advantage, but close to complete balance of volatile prices of domestic cotton market will be difficult to drive. So we believe that the current and next year, domestic cotton prices will take international cotton prices as the anchor, affect domestic FangQi competitive advantage through price fluctuation, will affect the domestic supply and demand.

The supply and demand structure is loose, the fundamentals hardly better

In 2017, main cotton cotton planting area of the northern hemisphere are rising significantly. On June 30, according to the U.S. department of agriculture (USDA) American cotton planting, according to a report in 2017, American cotton ShiBo covers an area of 12.055 million acres, more than 2016, 1.983 million acres, growth of 19.7%, slightly lower than expected in March intention plantings report. To July 2, American cotton new flowers budding rate is 45%, a 5% increase over the same period of last year, nearly five years the average budding rate was 44%; The boll setting rate was 13%, up from 10% a year ago, nearly five years an average of 10%; New spending growth was 54%, the week before was 57%, up from 56% a year ago.

In late June in northern India cotton planting has been basically completed, haryana, rajasthan and punjab, the total area of 1.374 million hectares, three cotton was increased by more than 35% over the same period last year; Madhya pradesh and gujarat grow because of the rain delay impeded, the planting area is still 29.5% over the same period last year, with the increase of rainfall of the central region planting will speed up the pace.

Fundamentally, declining ShiBo area is less than expected and the growth of crop could make quotation in excessive development after repair, but in terms of supply and demand structure, international cotton supply and demand is loose, the fundamentals hardly better.

The table is less than expected, general rise in commodity market

Since mid-june, including crude oil, the United States most goods falling and there was a significant rise, goods rose in March, the fed raising interest rates is behind the American financial is loose, the early market for liquidity squeeze expected to make the repair. FOMC meeting in June, the fed "on schedule" to raise interest rates by 25 basis points, and years is expected to raise interest rates again, will also raise interest rates three times in 2018, at the same time unveiled its shrinkage table plan and announced or implemented in this year.

Look from shrinkage table plan in detail, the federal reserve for the table standing room for manoeuvre, has been clear about the adjustment of the federal funds rate is the main means of monetary policy regulation, if the economy the way worsen, the fed could adjust to shrink even further increase asset purchases. In addition, the table manner is to err on the side of priority. The fed's shrinkage table plan, active passive shrinkage table was used to smooth safe way, through the difference between the investment scale is lower than natural maturity scale embodied in shrinkage table.

Shrinkage table on the scale of FOMC meeting June did not give a specific value, but the market forecast of $400 billion a year - a cut of around $500 billion. The shrink of asset side impact is limited, the market is more focused on the fed's expected stability. In June, however, has just released the FOMC meeting minutes also showed, fed officials are divided on the issue of when to start the shrinkage table.

The fed to shrink the attenuation of the table position as well as starting the process of vacillation make market for monetary tightening is expected to weaken, the U.S. financial markets to maintain loose state, are supportive of assets such as stocks, commodities prices. However, American cotton prices rebound obvious weak, so the fundamentals bearish still is one of the important factors to suppress prices, but also need to concern us monetary policy.

E domestically, high grade resource prices will not escape

In the international cotton prices fallen under the drive of national cotton reserves June started week downgraded, total reduction around 467 yuan/ton, national cotton reserves clinch a deal price also present a downward. National cotton reserves - 26 June 30, clinch a deal the week the average price 14666 yuan/ton, than in May fell 640 yuan/ton. Although the average price clinch a deal the fallen, but always maintain the highest price in 16300 yuan/ton, near outshine others. It shows that the market for "double 28" optimism "double 29" and other high-grade cotton and more rigid requirements.

As a result, CF1709 contract situation is relatively strong. Larger quantity of this year's nan Yang cotton futures warehouse receipt and quality indicators in line with market demand generally, so in June 1709 contract fell to 15000 yuan/ton, near the high-grade futures warehouse receipt of the price advantage, traders and textile enterprises large purchases by midpoints high-grade futures warehouse receipt, 1709 m contract price support.

The graph is high-grade national cotton reserves is compared with the price high-grade futures warehouse receipt (yuan/ton)

The graph is high-grade national cotton reserves is compared with the price high-grade futures warehouse receipt (yuan/ton)

However, since the national cotton reserves round, these high grade resource JC40s yarn prices have been falling, the representation of the products in high raw material costs, product revenue fell under the double restriction of JC40s processing gradually decline in profits. To the end of June, profit index has fallen to a level with C32s JC40s processing, and processing may further reduce profits.

From the perspective of textile enterprises, under the condition of equal profit spinning JC40s yarn into higher raw material costs, so lower profit margins. Currently JC40s yarn varieties to the attraction of the textile enterprises have a big discount, because once the raw material supply tension and other factors make processing profits fall further, the enterprise will take the initiative to reduce capacity or adjust the yarn varieties, selection in the production of raw materials supply more abundant C32s yarn varieties.

The graph is C32s, JC40s processing profit index contrast

The graph is C32s, JC40s processing profit index contrast

China cotton business inventories, according to a report in China at the end of May 2016/2017 XinJiangMian inventory of 1.0492 million tons, 633400 tons of xinjiang area, mainland warehouse 415800 tons, 24000 tons of in road transport.

In 2017 national cotton reserves wheel makes large changes have taken place in mainland China cotton textile enterprise structure, namely the national cotton reserves increased usage, 2016/2017 XinJiangMian usage down. In April 2017, as the previous auction