Short-term cotton prices under pressure

According to a sample of the National Cotton Surveillance System, as of May 7th, the average number of days of inventory use by the sampled companies was approximately 32.1 days, a decrease of 1.2 days compared with the previous period and a decrease of 5.1 days compared with the same period of last year. The cotton industry inventories in major provinces in the country have increased significantly, such as Anhui, Hunan, and Fujian. It is estimated that in the future, the major mainland cotton provinces will have a long way to go to save inventory, and industrial transfer is imperative. The domestic cotton price trend continued to fall. The average price of the national cotton price (CNCtton A) was 18,311 yuan/ton, down by 924 yuan/ton from the previous month, and the national cotton price (CNCtton B) average price was 17,449 yuan/year. Ton, down 862 yuan/ton from the previous month.

According to data from China CottonNet, the survey of procurement intentions shows that at the beginning of May 2014, enterprises that prepared to purchase raw materials accounted for 64%, a decrease of 5% from the previous quarter and a year-on-year decrease of 5%. Enterprises with a wait-and-see attitude accounted for 36%, a month-on-month increase of 5 %, up 11% year-on-year. From January to March 2014, the growth rate of the value-added of textile enterprises above designated size in China was 7.3%. China's textile and apparel exports reached 355.26 billion ***, a year-on-year decrease of 2.3%. The markets in Europe, America and Japan are still showing a downward trend, while exports from Southeast Asian countries have risen. The overall situation is flat. In particular, the recent Canton Fair is even more bleak and orders have dropped significantly.

At the same time as the price of raw materials fell, the prices of yarns and cloths also dropped, and the drop was greater than the drop in raw material prices. The output of gauze fell slightly year-on-year, and the main business income, total profit, and number of employees in cotton textiles decreased. It is estimated that the price of raw materials will fall in the downward range before September 2014, yarn and cloth prices will also show the same trend, and after October, the market will face many uncertainties such as throwing storage, demand, and cotton yarn imports.

The end of the collection and storage policy will add downward pressure on cotton prices in the short term. This year Xinjiang cotton has implemented a target price of 19,800 yuan/ton subsidy, which is more of a guide price for Xinjiang cotton farmers' psychological price. For mainland cotton farmers, it is a relatively bad news. For the textile industry in the middle and lower reaches of the Mainland, in the short-term, companies purchase raw materials negatively or tend to purchase cotton yarn. In general, the trend of Zheng cotton in 2014 mainly depends on supply and demand factors, especially demand. In the context of high stocks, the demand for cotton is crucial. However, due to the downturn in China's economy, cotton consumption is not optimistic. China's subsidized cotton target price is 19,800 yuan / ton, the specific calculation, the estimated price of Zheng cotton ** or in 16,000 yuan / ton operation.

In summary, due to the weak demand of mid-and-downstream companies and the end of the purchase and storage policies, the cotton market lacks upward momentum. The author predicts that cotton prices in the first half of 2014 will be unsatisfactory. Strategically, in the short-term, Zheng Cotton is short of rallies and long-term attention to do more opportunities.