The cotton market will continue to fluctuate weakly

In the wake of the stable rebound of ICE cotton and the sharp rise of domestic and foreign agricultural products, the Zheng cotton market has recently rebounded weakly. Since the main contract 1301 has been low since 18635 yuan/ton, it has rebounded close to 1,000 yuan/ton, but transactions and positions have continued to remain in the doldrums. We believe that the Zhengzhou cotton market will continue to maintain the pattern of weak oscillations. The pressure above 20,000 yuan/ton will be heavy, but the 19,000 yuan/ton will be significant. It is suggested that the operation should be carried out with low suction and high throws.

Supply exceeds demand determines the low oscillation of cotton

According to the US cotton planting intention report released at the end of June, the area sown by American cotton in 2012 was 767.58 million mu, which was a year-on-year decrease of 14%. The planting area of ​​upland cotton decreased by 14% year-on-year, and the planting area of ​​Pima cotton decreased by 24% year-on-year. Due to the decrease in US cotton production, in the USDA report released on July 11th, the global cotton ending stocks in 2012/2013 were significantly reduced to 72.39 million bales, far less than the record of 74.51 million bales announced in June. Boosted the cotton price. However, this year's global cotton market still exceeds demand, with an inventory-to-use ratio of 66.45%. China's cotton ending stocks are expected to be 31.8 million bales, accounting for nearly 44% of the total global inventory. It is the loose fundamentals of the world and China that have led to a weak consolidation of domestic and foreign cotton prices. The increase rate in recent months has lagged far behind soybeans, wheat and corn in the agricultural product sector.

Textile companies are not willing to purchase

Since the beginning of this year, the European debt crisis and continued appreciation of the currency have had a certain impact on the export of textile enterprises in China. In June 2012, China's textile and apparel export value was US$22.888 billion, which was a 4.83% increase from the previous quarter and a 0.04% year-on-year decrease. Among them, textile exports amounted to US$8.408 billion, a year-on-year increase of 0.59%; and apparel (including clothing and accessories) exports amounted to US$14.48 billion, a decrease of 0.41% year-on-year. Because textile and apparel export growth slowed down and cotton raw material prices remained high, the enthusiasm of textile companies for purchasing cotton was not high. Most of them used with mining, and the average cotton inventory fell within 15 days. Domestic spot 328 cotton stabilized at 18500-18600 yuan / ton, Xinjiang cotton quoted at 19,000 yuan / ton. CF1301 price is higher than the average spot price of 700 yuan / ton, which has a certain attraction for hedgers, weak spot prices have constrained the cotton rebound further space.

Huge spreads lead to large domestic imports

Since February of this year, the spot price of cotton in China has been higher by 2,000-5,000 yuan per ton compared with the international market. Therefore, the annual import volume of this cotton production has greatly increased, adding to the already weak domestic market. According to the statistics of China Customs, from January to June 2012, China's cumulative import of cotton reached 3.0547 million tons, an increase of 1.729 million tons, an increase of 130.4%. However, due to the sharp drop in the price of cotton, the rate of contract defaults signed prematurely has risen sharply. According to the US cotton export report announced in the latest month, the number of U.S. land cotton contract cancellations in 2011/2012 exceeded the number of newly signed contracts. In particular, from June 11 to June 15, the net export contract volume was -13.66. Ten thousand tons, of which China cancelled 139,900 tons of contracts. A large number of China's imports will support the international cotton market, but excessively high default rates will lead to the impediment of international cotton price increases, which in turn will affect the domestic cotton market and affect the purchasing enthusiasm of textile companies.

Despite the existence of many negative factors in domestic cotton, the 2012/2013 national reserve price was 20,400 yuan/ton. The overall agricultural products experienced a strong rise due to weather speculation, and the monetary environment gradually loosened. These bullish loans will support the stability of domestic cotton prices at 19,000. - Weak oscillation between 20,000 yuan/ton.