US cotton rose more reason than Zheng cotton

Since the beginning of this year, China has imported 810,000 tons of Indian cotton, which accounts for 40% of total imports, which is an increase of three percentage points over the same period of last year. Textile companies importing Indian cotton said that most of the contracted cotton has been shipped to the country, and the remaining amount is relatively small. It is reported that at present, the number of Indian cotton registrations is about 1.7 million tons, and the shipment volume exceeds 1.4 million tons. The actual shipment volume accounts for about 85% of the total.

We believe that the Indian ban will reduce the market supply of 300,000 tons, but it will not trigger the US Department of Agriculture to adjust global trade volume. Considering that some textile mills that purchase Indian cotton may shift orders to the southern hemisphere (Australia and Brazil), and US pre-sale of cotton has also been completed, there is no more potential contracting resources, and the rise of US cotton in the ICE market is higher than that in China. More reason. We expect US cotton to hit a range of more than 95 cents and maintain a wide range of volatility from 85 cents to 102 cents.

From the global and China supply and demand data, the pattern of global oversupply of cotton has laid the foundation for the difficulty of a substantial increase in cotton prices, and it also makes the overall 2011/2012 cotton season will show a wide range of shocks. According to the latest report of the US Department of Agriculture (USDA) in February, China's cotton production in 2011/2012 was about 7.294 million tons, an increase of 653,000 tons over the previous year, an increase of about 9%. This year's domestic cotton consumption situation is not optimistic, consumption is estimated at only 9.58 million tons, a decrease of 435,000 tons compared with the same period last year. Until the first quarter of 2012, China’s cotton consumption has not yet shaken off its downturn. Large, medium and small textile companies have tolerated varying degrees of pressure, and the survival of small and medium-sized textile companies is worrying. The increase in output and sluggish consumption result in an increase in inventories. It is expected that the national cotton ending stocks will reach 3.931 million tons in 2011/2012 and the stock consumption ratio will be 40.95%, much higher than the 34.5% estimated in December last year. The high point.

From the perspective of China's cotton production and sales data, it does not seem to be self-sufficient. However, domestic cotton supply is not limited to self-produced cotton. Every year, China imports large amounts of cotton from cotton-producing countries headed by the United States. Export sales of US cotton have been significantly enlarged since the fourth quarter of last year, and sales growth has almost all come from exports to China. China’s large purchases do not seem to be driven by market demand, but rather by government purchases to increase state reserves.

According to US Department of Agriculture estimates, China's 2011/2012 cotton imports are expected to increase 41.9% year-on-year to 3.701 million tons, reaching a record high.

Before the introduction of the ban on India, we conducted a grassroots survey on textile companies and found that: (1) The quota price has risen, but the substitution of cotton is still strong; (2) Before the price of yarns has fallen to the beginning of the year, some companies may further lower their selling prices; The total amount of resources is abundant, and it is not lacking before April; 4 As the blended textiles also slipped with the price of pure cotton, the estimated gross domestic consumption of the major textile mills will be significantly lower than the 9.3 million tons estimated by the USDA; 5 Most companies expect the cotton price to increase. Lower than holding costs, do not plan to expand purchases.

Taken together, through the estimation of the total commercial inventories in the market, the industry generally believes that there is a downside risk in the market after the end of collection and storage. Therefore, we expect Zheng Cotton to still have a short-term opportunity in the short-term, but the lack of medium-term upward momentum will suppress the rebound of cotton prices.