Zhengzhou Cotton Expected to Retreat

Affected by the sharp fall in the US cotton price and the domestic hedging arbitrage funds, the Zheng cotton 1209 contract has experienced sharp rises and falls in the recent past, and it has seen an inverted “V” type reversal pattern. US cotton has gradually digested the bearish effect of the USDA's February report on increasing stocks. The short-term factor that currently dominates the domestic trend of Zheng cotton is the current price spread, and the long-term factor is the recovery of domestic cotton downstream consumption.

The spot price rose steadily, and the spot price difference returned to the store since last September. The spot price of domestic cotton rose slowly from around 19,000 yuan/ton. As of February 21st, the spot price of China's cotton 328 index was 19,572 yuan/ton, which was a difference of 228 yuan/ton from the country's unlimited reserve price of 19,800 yuan/ton. In comparison, the price of cotton ** increased even more, from the highest of 20,000 yuan/ton to 22,730 yuan/ton, which led to a rapid increase in the current cotton price gap.

According to Zhengzhou data, the effective cotton warehouse receipts quickly increased from 200 in early February to around 1,000. The enlivening of funds for the insurance funds has caused the recent downturn in Zheng cotton, which has also reduced the current price gap. The latest cotton price difference is 2143 yuan / ton, returned to the active range of the previous spread, which undoubtedly once again released the room for growth in Zheng cotton. Without considering the influence of other factors, the spot price rise target supported by the reserve is RMB 19,800/ton, from which it can be roughly estimated that the corresponding price increase target should be around RMB 22,800/ton.

The rise of this wave of consumer spending after the ups and downs of late consumer spending has already digested the bullish news that domestic cotton planting area will be reduced by 10% in the new year. At present, the collection and storage are nearing the end. From the mid-to-long term perspective, the key factors leading the Zheng cotton trend in the later period turned to the domestic cotton consumption situation.

The domestic textile industry is still facing a variety of unfavorable factors. Although the production, export, and profit data for the entire year still increase steadily, the growth rate shows a monthly decline. Statistics show that in 2011, the value added of textile industry above designated size increased by 8.3%, the growth rate decreased by 3.3% year-on-year, and textile and apparel exports continued to grow, but the growth rate declined rapidly after August. China's total textile and apparel exports reached 247.9 billion U.S. dollars, an increase of 20% year-on-year, and the increase rate was 3.6% lower than the previous year. Although from the data point of view, the domestic demand support role of cotton consumption has increased, but still does not change the domestic textile industry's export-oriented status, the focus of attention in the later period is still the recovery of European and American economies and spring orders for the Canton Fair.

From the point of view of the production cycle of domestic textile companies, textile enterprises have gradually digested high-cost cotton in the early stage. After the first quarter, textile companies will once again usher in the traditional peak season for consumption. The demand for textile companies will improve the demand for cotton.

Taken together, the sharp drop in the price of Zheng cotton in the previous period made the current price difference in the cotton period return to normal, and the hedging profit of the ** disk was also reduced. With the support of storage and storage, with the steady rise in spot prices, Zheng cotton is expected to be boosted and strengthened again in the short term. As far as supply and demand are concerned, I expect that the reserve volume at the end of March is expected to reach 3 million tons. Coupled with the advent of the late cotton consumption season, the domestic cotton market may face a period of tight supply and demand.

Seen on the stock market, Zheng cotton main 1209 contract rebounded on Tuesday, the long-term average 60-day moving average rising momentum unchanged, the Japanese K-line on the 4th consecutive consolidation in the 21600-21750 yuan / ton range, the short-term is expected to rely on this range to stabilize recovery. (Gold Dollar **)

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