The Far-Reaching Impact Of Inventory Policy On Cotton Reserves

Overall, the actual impact of the turn out on the short-term market is weak, which may cause the 1509 contract to continue to fall. Although the policy provides the imagination for the acquisition season after August, the 2016 round is already a foregone conclusion. The increase of supply and the determination of the price will restrict the rebound of Zheng cotton, thereby restricting the enthusiasm of the speculative capital entering the market. In the future, Zheng cotton will maintain a large probability of interval shocks, and maintain the strategy of selling high inflation on spot operation.

Approved by the State Council, the relevant departments decided to follow the principle of promoting sustainable and healthy development of the industry, guiding the smooth operation of the market, lightening the financial burden and improving the cotton storage control mechanism, and adopting the way of "asymmetric rotation, first round and backward entry, multiple rounds of production and fewer rounds" to orderly digest the state reserve cotton stocks and gradually reduce the reserve scale to a reasonable level.

According to the information released by relevant departments in June 30th, 1 million tons of cotton were produced in this round, of which 330 thousand tons of domestic cotton were produced in 2011, 13200 yuan per ton, 2012 tons of domestic cotton 470 thousand tons, 14200 yuan / ton of base price, 2012 tons of imported cotton to National storage cotton in 2012, and 15500 yuan / ton of base price.

In September, when the new cotton market came into operation, 40% of the total output of this round was selected, which provided space for the government to support the market in the new year.

From the analysis, we believe that the policy of reserve cotton will affect the market in the following ways:

According to the supply and demand balance sheet of Wanda futures, China's cotton output is 6 million 360 thousand tons in 2014/15, and it is expected to import 1 million 700 thousand tons. In the 9 months from September 2014 to May 2015, China has imported 1 million 332 thousand tons of cotton, that is, the new supply of 7 million 692 thousand tons this year. If 300 thousand tons were imported in 6-8 months, the annual supply will reach 8 million tons, far more than the consumption of 6 million 700 thousand tons.

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From the perspective of market inventory structure, the domestic low grade cotton price is below 13000 yuan / ton, while the rotation of cotton and domestic low grade cotton and zhengmian stock grade overlap, high level resources shortage problem is still unable to solve, the end of the year will widen the class price difference, turn out to increase the supply of low grade cotton, and the sales pressure of low-grade cotton mainly based on the cotton picking by the Corps may lead to the further downward trend of the low grade cotton prices at the end of the year.

From the above, we have analyzed that the supply of domestic supply is adequate this year, and there is no rigid gap. Therefore, it may occupy the market with spot stock, and eventually result in a fall.

Although the total output of this turn reached 1 million tons, according to the lowest price of 13200 yuan / ton in 2011, if the reexamination standard grade 3 is reduced to 5, the premium will be 1000 yuan / ton to 12200 yuan / ton, but the internal breaking strength and the micron value of cotton will not be greatly affected. The cotton based stocks in Xinjiang are expected to be sought after by the market.

In 2012, 470 thousand tons of cotton were taken at 14200 yuan per ton. If the grade difference reached 1000 yuan / ton, the paction price still reached 13200 yuan per ton, and the quality of the 2012 annual reserve cotton was relatively poor.

At present, the price of hand picked cotton and wool weight in the southern part of the market with better market quality is different from 13800-14200 yuan / ton. Compared with that, the selling price of reserve cotton in 2012 is not competitive enough, so it is difficult to get the favor of textile enterprises.

Therefore, the selling price of reserve cotton is not competitive, and the proportion of final paction may be too small. The impact on the market is more psychological rather than practical.

3, the supply of low-grade cotton is increasing, and it is difficult for Zheng cotton inventory to flow out, which will suppress the September contract.

At present, the Zheng cotton 1509 contract will be settled at 12700 yuan / ton, and the gross weight will be 13000 yuan / ton. If the textile enterprise buys the contract, the gross weight cost will reach 13200 yuan / ton. The price is higher than most of the low grade cotton prices in the market, and it is also significantly higher than the selling price of the national cotton store in 2011.

That is to say, under the condition of abundant domestic cotton resources at present, Zheng cotton will make Zheng cotton face new competitors, and it is difficult to attract textile enterprises to enter the market to undertake warehouse receipts. The implementation of the new premium system in 2015/16 will lead to a large increase in the cost of warehouse receipts to the 1601 contracts, and the willingness of the bears to make final delivery at the 1509 contract is very strong. But at present, the contract is difficult to attract speculation and textile buying into the market. The pressure of inventory will keep the contract down and close to the low of 12300 yuan / ton.

4. At the top of the policy, there is limited space for speculation.

From the analysis of the reserve cotton policy, the government has strong willingness to take turns. Although the selling season will stop selling reserves in the beginning of September 1st, the probability that the government will continue to turn out no later than the end of March 2016 will be great. According to the price of this year's rotation, the probability of extending the current price will be great in the next year, so that the market low grade cotton prices will be limited to below 13000 yuan / ton, and the situation of high level resources shortage is still difficult to improve. The national cotton storage, Xinjiang machine picked cotton and low-grade real estate cotton will seize the market and increase the sales pressure in 2016, thus inhibiting the long-term cotton price.

A small increase in space will make it difficult for the Zhengzhou cotton market to attract institutional investors to enter the market, and selling prices will keep cotton prices weak for a long time.

Therefore, although the new cotton listed in September, Zheng cotton is expected to rebound in terms of total production, business rush and policy support, but the rate will not be too great. The national day will be the best time to sell and hedge.

5, the wheel storage mechanism provides support for the 1601 contract.

Unlike previous years, this reserve cotton policy clearly put forward the concept of round storage, although the total volume of rotation does not exceed 40% of the total turnover of the current round, but this leaves enough room and policy basis for policy adjustment and control of cotton next year.

In 2015/16, the government will continue to target price subsidies for cotton growers and suspend production in September 1st to stabilize the purchase price for the new year.

At present, the sharp reduction in production in China, led by the US and 2015/16, is a foregone conclusion. Because of the significant reduction in cotton production in the mainland, part of the mainland's enterprises have increased their contracts in Xinjiang, but the total number of resources has been reduced. The situation of rush harvest has been re formed in 2015. The government's acquisition and storage may pry up the market price as entrusted by the central city of cotton in 2014, thus raising the cost of purchasing, increasing the price of lint and supporting the 1601 contract to create an annual high point before and after October.