Analysis of the cotton market in 28/9

Date: October 13, 28 13: 47 Author: China Cotton Information Network

Around the 11th, the author visited cotton fields and cotton processing enterprises in southern Hebei and northwestern Shandong, and received warm reception and help from some friends in cotton circles and supply and marketing cooperatives. I am deeply grateful. I have summed up my personal opinion, and there are some elements that are generalized or hasty. Please correct me:

1. Can the domestic cotton output in 28/9 really be the same as that in 27/8? I didn't go to Xinjiang this year, so I dare not jump to a conclusion. However, from the perspective of southern Hebei and northwestern Shandong, there is little hope for cotton yield to increase year-on-year. There are not many root flowers and mid-term flowers in southern Hebei, and autumn peaches are growing well. However, the cooling around the 11th has affected the growth and quality of cotton, and the cotton picking progress in Dezhou, Shandong Province has reached more than 7% after the 11th. However, a considerable number of cotton farmers report that the seed cotton output has declined rather than increased year-on-year. The yield per unit area in Jiangsu has increased, but the cotton planting area in Anhui has declined sharply. The situation in Hubei and Henan is "outside the wall" with that in Anhui and Jiangsu, and the high yield in Hunan, Shanxi and Shaanxi is difficult to change the overall situation. The author thinks that the reduction of production in the mainland is at least 2,-3, tons, while the temperature drop in northern Xinjiang has a certain impact on the picking progress and quality, so the total domestic output in 28/9 will not exceed 7.5 million tons.

2. Capital is not the bottleneck that affects and restricts cotton processing enterprises to purchase seed cotton. According to the investigation of several municipal and county cotton and linen companies, they have got more or less loans from the Agricultural Development Bank through third-party supervision or property mortgage, but they are afraid to accept them because of the "jumping up and down" of cottonseed and the downward pressure of global commodity futures, such as a 4-type factory of a company, until October 1. The cotton gin can't be started at all, but some individual 2-type factories and 4-type factories buy and process by their own funds, but basically all of them are processed according to the "order processing" of cotton mills, which is enough to load one car in one car and never stock it. The author once visited a 4-type factory in Dongguang that bought more than 5 million kilograms of seed cotton, and the converted increase fee is about 25-25 per ton.

3. Even if the purchase price of seed cotton falls below 2.9 yuan/kg, farmers' enthusiasm for abandoning cotton to grow grain is not high. On the one hand, the investment in planting winter wheat and corn in two seasons is greater than that in one season, and the labor intensity is not small during centralized harvesting. In addition, for some cotton farmers, cotton planting is mostly for "living money", so they can make up their family payments at any time after September, and they will shift from "inflation prevention" to "austerity prevention" with the domestic economic situation. All commodities, including agricultural products, showed a downward trend and returned to rationality. The prices of corn, wheat, soybeans and so on were adjusted back across the board. On October 8, the purchase price of corn in Hebei, Henan and other places slipped to about .8 yuan/kg, while in Xinjiang it was as low as .77 yuan/kg. The trend of "flat opening and low going" was formed throughout the year, and the price of grain and cotton declined to a certain extent, but it did not force cotton farmers to make up their minds.

4. Cotton textile enterprises "hit the wolf with hemp stalks-both sides are afraid". On the one hand, when purchasing new cotton and Xinjiang cotton in 27/8, we should try our best to lower the cash price. On the other hand, we are worried that the falling cotton price will knock down the "domino brand" of the whole industrial chain, resulting in a sharp drop in the sales price of cotton gauze, which will reduce the immediate profit. Small and medium-sized cotton textile enterprises in various places have difficulty in financing, and private funds and usury have crushed the confidence of some manufacturers to stick to it or "start again". At present, some cotton enterprises and cotton mills report that even if the agricultural development bank loans are issued in full, they will not dare to use them this year. The tight capital chain of enterprises is only a superficial phenomenon, and the serious shrinkage of downstream sales terminals is the key to the problem.

On October 6th and 7th, the huge increase in the trading volume of Zheng period was obviously a short-term behavior of Zhejiang Dadi Futures Company and other speculative forces. The capital was realized in a big inflow and a quick outflow, and the news that the country might purchase and store was not very stimulating. Under the circumstance that the global commodity market was full of "green flags", the domestic cotton market almost played the big drama of "breaking through the Central Plains", but after making profits on the 8th, a large number of funds fled, and the "episode" ended. On October 8th, the People's Bank of China decided to reduce the RMB deposit reserve ratio of deposit-taking financial institutions by .5 percentage point and the one-year RMB deposit and loan benchmark interest rate by .27 percentage point from October 15th and October 9th, respectively. It is rare to reduce both the deposit and loan benchmark interest rates in recent ten years, and the seven major central banks in the world have cut interest rates to rescue the market, which shows that the global economic crisis is inevitable. According to the author's analysis, for China, the second half of 28 is not only a prelude to the arrival of the financial storm, but 29 is the hardest hit. The cotton textile industry will be shuffled and eliminated, and the cotton industry in China will be closer to self-sufficiency. Personally, I think:

1. The trend of cotton price falling along with the whole commodity market will not fundamentally change in the short term. The accelerated decline of cotton price will speed up the introduction of purchasing and storage policies, but I am afraid it will be difficult to hold the bottom. There is little resistance for domestic third-class cotton to break 12,, and cotton farmers will become the "victims" of this game.

1. The minimum purchase protection price discussed by relevant departments has been issued in some areas, with the picking progress of seed cotton reaching more than 5%, and "the day lily is half cold". According to the end of September, the provincial branches of the Agricultural Development Bank successively announced that the online loan and loan risk control line for the purchase of new cotton in 28/29 are 4.8 yuan-5.6 yuan (5.4 yuan/kg in Xinjiang) per kilogram, which is obviously lower than that of cotton farmers. On the premise that the planting cost and labor cost have risen sharply, cotton has become the representative of "overcharge three or five fights". The untimely introduction and incomplete implementation of policies have increased the concerns of cotton farmers and cotton enterprises.

2. The online standard benchmark of the new cotton purchase loan of the Agricultural Development Bank is tentatively set as 5 yuan/ton, which can fluctuate according to market changes, with the maximum floating rate of 5 yuan/ton. For cotton under the supervision of the third party, the maximum floating rate of the purchase loan can be 6 yuan/ton. Therefore, the loan ceiling for 1 ton of lint is 11,2 yuan, while that for Jiangsu, Hebei, Anhui and other provinces in 27/8 is 57 yuan/ton.

3. The premise of purchasing and storing is "the price of cotton is too low". According to Hubei Agricultural Development Bank, "the upper line of the loan is 5 yuan/burden, and the risk control line of the loan without floating is 11,5 yuan/ton (the price of standard seed cotton is controlled within 2.6 yuan/kg)." From the point of view, the factory price of the third-grade lint is 12,, which is the bottom recognized by the state. Recently, the factory price of Xinjiang 329 and real estate third-grade cotton has dropped to 12,5-12,8 yuan/ton, which is still more than 5 yuan/ton from the "warning line" designated by the state.

4. With the economic crisis parachuting into Europe and spreading to the Asia-Pacific region, countries have started rescue plans one after another. Although the pace of global futures commodity decline has slowed down, there is still some room from the bottom. Cotton futures are more influenced by economic factors and separated from the simple supply and demand level.

Second, China's cotton problem lies in consumption. Simply increasing the output is just the real pressure of the government to justify itself. The consumer market and consumer confidence in developed countries such as Europe and the United States have shrunk dramatically. The tight capital chain is only a manifestation. Many enterprises say that even if the Agricultural Development Bank is willing to lend heavily now, they dare not use it. First, the machines are full, and they can only increase the gauze inventory. Now they are basically producing according to orders and stopping without orders. According to the report of USDA and Cotlook in August, the cotton consumption in China in 28/9 was estimated to be 11.5 million tons and 1.58 million tons respectively, which was at least 1 million tons different from the author's estimate.

1. In 27, China's textile and clothing exports to the European Union accounted for 16.84% of China's textile and clothing exports. Although the RMB has continuously appreciated against the US dollar, it has continuously depreciated against the euro. However, since 28, the euro has depreciated sharply, reaching more than 1% in one month. China's textile and clothing exports have been hit hard, with a large surplus of export quotas to the United States and Europe. Many enterprises "bite the bullet" to take orders in order to achieve foreign exchange earning targets.

2. The subprime mortgage crisis in the United States is only a trigger for the global economic recession, and it is spreading from developed countries in Europe and America to Asia. China's foreign exchange reserves have depreciated sharply (at least by more than 1%). As a large producer of trade surplus, the textile and garment industry has been hit hard. It is self-evident that enterprises are faced with the embarrassing situation that it is difficult to take orders, and it is even more difficult to take orders. Anyway, they can't survive standing, sitting and lying down.

Third, the worries about China's economy in the second half of 28 and even in 29 are getting worse. Cotton and cotton textile industry are only a relatively weak link in this big environment. Some people make an analogy: China has just begun to be hit by the global economic crisis, and it has just begun to pay for Europe and the United States. This gust has just blown to Tianjin, and it is still more than 1 kilometers away from Beijing. In a short period of one year, the China government has used almost all financial instruments, from regulation to relaxation, from inflation prevention to deflation prevention, and from cold-shoulder to passive rescue. Therefore, the author is still not optimistic about the cotton textile industry in 29, and the cotton consumption capacity is likely to change from a "soft landing" to a "hard landing", which makes it difficult for a considerable number of textile and garment enterprises to survive this "winter".

1. The financial crisis in the United States shows no signs of improvement. Recently, the consumer credit in the United States has declined for the first time in 1 years. Federal Reserve Chairman Ben Bernanke even said that the economic growth prospects in the United States have deteriorated. What is even more frightening is that all this has spread in Europe and even the global market like an infectious disease. The International Monetary Fund (IMF) has called on all countries to take comprehensive actions to prevent the global economy from falling into a long-term decline.

2. A considerable number of economists believe that interest rate cuts have limited effect on solving the crisis, and may only slow down the economic slowdown and prevent it from falling too fast, but the downward trend will not change. This round of interest rate cuts is the first time that China has acted in synchronization with global central banks. Compared with this, even if there was coordination before, there would be a little time lag. According to industry analysis, this simultaneous interest rate cut is only the first step, and China may be more involved in other simultaneous actions of global central banks.

In 28/9, there must be no shortage of cotton enterprises and textile enterprises

Release date: August 6, 28 11: 34: 59 Text selection of China Cotton Information Network:

1, Basic cotton information:

1. Forecast the annual supply situation from the basic information such as planting area, yield and weather

A: In 28/9, 84.68 million mu of cotton was planted, down by 3.15% year-on-year, and the survey of China Storage decreased by 4%, including 7.53 million mu in Xinjiang Corps, down by 913, mu, and 35% in Jiangsu Province. B: Henan and Jiangsu have greatly reduced production

c: Shandong, Hebei, Jiangsu and other inland cotton areas have more rain in the early stage, and the cotton market is estimated to be delayed by 1-15 days. The mainland cotton areas will basically be listed around September 2, and Shanxi, Shaanxi and other places can start weighing and processing around the middle and late August.

D: 27/8 cotton supply: 76+28. In 26/7, it was 1.21 million tons, up by 3.6% year-on-year. < P > F: Estimated output in 28/9: USDA：773；; ICAC：86； This website: 722; Cotlook：75—— the weather in the last month and a half depends on it

2. Judging the cotton consumption capacity from the spinning volume and the growth rate of fixed assets investment

a: By the end of June, the spinning volume this year was 17.4485 million tons, and it was not a problem to break 21 million tons in the whole year; But there are many questions. In June, the spinning volume reached a record of 1.999 million tons?

b: in 26/7, the total supply of polyester staple fiber, viscose staple fiber and acrylic staple fiber was about 8.8-9 million tons, while the supply of cotton was 1.21 million tons, and only 19-19.2 million tons were used for spinning (excluding losses), while the spinning volume in that year was 19.3 million tons? Only 38, tons of cotton is needed to increase the spinning capacity by more than 2 million tons?

c: in 22, 23 and 24, the growth rate of fixed assets investment in China's cotton textile industry was above 1%, and it decreased to 55.5%, 19.8% and 13.32% in 25, 26 and 27 respectively, and the growth rate decreased to below double digits from January to June 28

d. Is the new production capacity large or the proportion of reduction and shutdown high? This website thinks that the demand has decreased by 3,-5, tons

f: The demand of Xinjiang cotton, high-grade American cotton and Australian cotton is lower than expected, indicating that high count yarn and high count and high density grey cloth have encountered export bottlenecks; In addition, the industrial upgrading is blind and too fast

3. Estimate the cotton price from planting, purchasing, processing, cotton by-products and transportation costs < P > A: How much did the materialized cost of cotton planting increase in 28/9? 7-12 yuan/mu, with an increase of more than 2%. Based on the yield of 5 kg/mu, the price of seed cotton rose by .15-.2 yuan/kg

b: What determines the purchase price of seed cotton in 28/9 is mainly cottonseed price? The price of cottonseed is directly affected by the prices of crude oil, soybeans, corn and other related products, the depreciation of the US dollar, geopolitics and fund speculation-the rise is still the theme

c: the oil price of finished products (93# gasoline generally rises by .85 yuan/liter) and the rising labor cost (picking three silk and ginning) lead to the cost of 1 ton of lint of 4-5 yuan; Calculated by 3 kilometers, the transportation cost has increased by about 45 yuan-the total is close to 1 yuan

4. Analysis of national policies on cotton and cotton spinning

(1) For cotton:

a: Xinjiang cotton transportation subsidy policy. From 27 to 21, other measures are needed: it is possible to raise the purchase price of seed cotton in Xinjiang and invest in cotton textile mills in Xinjiang to move back to the mainland?

b: the coverage of improved seed subsidies is shrinking-the price of cotton seeds is rising, the subsidy area is falling and cotton farmers' understanding of "bad improved seeds"

c: it is an inevitable process for cotton to be imported into sliding duties from temporary import tariffs to the integration of the two taxes until it is completely abolished, provided that cotton farmers are given enough cotton planting subsidies.