Cotton Bull Market To End: Demand Is Strong, Supply Is Still Tight.

Our country this year

China's cotton supply was tight in 2009/2010, and once there was "money can't buy cotton."

In another month or so, new cotton will be on the market. Will the bull market in the cotton market change? Through the field investigation in 7-8 cotton fields in the whole country, the author made a comprehensive analysis of the situation and the report of the US Department of agriculture.

World cotton

World cotton supply and demand this year is in a tight balance pattern.

Global cotton production is projected at 25 million 445 thousand tons in 2010/2011 and the demand is 26 million 317 thousand tons.

In 2009, the US cotton production was 2 million 650 thousand tons, and the output in 2010 was estimated at 4 million 30 thousand tons, an increase of 52% and an increase of 1 million 280 thousand tons compared with last year.

In early 2009, the US cotton inventory was 1 million 380 thousand tons. In August 12th, the US Department of Agriculture announced the existence of 680 thousand tons in the beginning of 2010. That is to say, 700 thousand tons of cotton and 1 million 280 thousand tons of cotton production need to give priority to replenish domestic stocks, and the actual export increment is about 580 thousand tons.

But we need to note that the estimated output of US cotton in the new year is 52% higher than that of last year. Considering that there is still more than a month to go before the new cotton is listed, the US cotton may be affected by rainfall and hurricanes, and the weather will affect the actual increase in production.

In addition to the above main cotton producing areas, the climate of Central Asia (Kazakhstan, Kyrgyzstan, Kazakhstan and so on) is similar to that of Xinjiang region in China this year. Under the adverse weather conditions, the cotton production in Central Asia is limited.

Australia and West Africa are producing hundreds of thousands of tonnes of cotton this year, but their production accounts for a small proportion of the world and has limited impact on world cotton prices.

In the context of no significant increase in supply, global cotton demand will rise by 2.7% in the new year to 26 million 317 thousand tons. In 2010, global cotton stocks fell by 4.1%. At the end of the year, inventories were expected to be 9 million 930 thousand tons, and the inventory consumption ratio was only 37.7%, the lowest level since 1994.

Reality of cotton production reduction in China

According to the field investigation of the industrial center in Xinjiang in the cotton growing area in China, the Yangtze River Basin and the North China cotton producing area in 7-8 months, the cotton output in China is expected to be reduced by 1 million tons in 2010/2011. According to the subregional perspective, the output of Xinjiang cotton area is reduced by 500 thousand tons, and the Yangtze River Basin (Hubei, Hunan, Jiangsu and Anhui) has reduced output by 400 thousand tons, and the North China (Hebei, Henan and Shandong area) has reduced 300 thousand tons and total 120 tons. Considering the lack of monitoring of autumn flowers in the research, the cotton production reduction in China is expected to be about 1 million tons.

The planting area of Xinjiang cotton area has decreased by 15% this year. Weather and crop substitution are the main reasons for the reduction of the area.

In terms of weather, the temperature in Xinjiang area is low this spring, the snow is hard to melt, and the supply of snow water is reduced, which makes Xinjiang cotton area lack of seasonal water supply, and the lack of water leads to a decrease in cotton planting area.

In terms of crop substitution, some parts of Xinjiang have abandoned farmland for forest because of the protection of ecological environment.

Therefore, the planting area of Xinjiang cotton area has decreased by about 15% this year.

In addition to the reduction of planting area, Xinjiang cotton has been exposed to bad weather since its planting season. Low temperature, snowstorm, strong winds and hail caused the emergence rate of cotton in Xinjiang to reduce and local cotton fields to be eliminated.

Affected by the reduction of area and the damage of disaster weather, cotton production in Xinjiang will be reduced by 500 thousand tons this year.

The weather conditions of the Yangtze River valley from cotton planting to flowering and boll setting period have not been ideal. The continuous precipitation in July and the high temperature and clear heat at the end of the month led to further damage to cotton.

The cotton fields in the southern part of Hubei and Anhui were affected by heavy rain and strong winds. The cotton fields lodged and flooded, and the roots and seedlings of the low-lying cotton fields were severely damaged, the stems and leaves were damaged, and the cotton buds fell off. Meanwhile, the loss of soil fertility and the hardening of cotton plants also affected the normal development of cotton seedlings.

Affected by this effect, cotton's spring flowers and summer flowers have no results. Cotton production is obvious. Conservatism is expected to reduce production by more than 1/3. According to the 1 million 200 thousand tonnes of the Yangtze River Basin, the yield reduction is over 400 thousand tons.

North China cotton area (Hebei, Henan and Shandong) has reduced its planting area by about 15% this year. From late July to mid August, heavy rain has been seen in North China, and the situation is serious. Rainy weather is not suitable for cotton growth.

If the loss of per unit area is ignored, referring to last year's unit production level, only considering the reduction of planting area, with the total output of 2 million tons in North China, the reduction of output in North China will be about 300 thousand tons this year.

Domestic demand for cotton is strong.

China's cotton demand is gradually improving in the new year.

On the one hand, this year, the new and expanded cotton textile enterprises in China have increased their capacity in 20%-30%, and the increase in capacity of cotton textile enterprises has further stimulated demand.

On the other hand, all localities have raised the minimum wage level by 20%-30%, and the increase in income has increased the demand for cotton textiles.

According to the proportion of textile and clothing demand in China, textile and garment exports account for 20% of the total output, while the remaining 80% are sold to the domestic market. The demand for domestic market will increase the demand for cotton in textile industry.

From the view of China's national cotton reserves, the cotton stocks of China's national cotton reserves were 2 million 300 thousand tons at the end of August 2009. After pre dumping and 600 thousand tons of dumping, the stock of new cotton was only 600 thousand tons.

Therefore, the total gap of cotton in China is larger this year, which will undoubtedly increase cotton prices.

New cotton listing has limited impact on prices.

Seasonally, cotton prices will fall seasonally with increasing supply, but it is expected that the new cotton market will have limited impact on cotton prices this year.

In 2009, textile enterprises experienced the pain of "no money to buy cotton". In 2010, the world cotton was in a tight balance. China's cotton production is expected to decrease. The tight fundamentals have intensified the cotton rush mentality.

From the situation of many enterprises surveyed by the author, enterprises have already prepared funds early and wait for cotton to go public.

Cotton growers are looking up strongly this year, and the mentality of selling is very strong.

First of all, starting from the new cotton listing in 2009, cotton prices rose all the way. Some cotton farmers felt that the sale of cotton was too early and the price was too low.

New cotton will be on sale this year, and cotton farmers may be reluctant to sell.

Second, grain prices such as wheat and corn have been rising this year. From the perspective of grain and cotton prices, cotton farmers believe that only cotton prices will rise, and they will be able to balance their income and mentality.

Finally, the cost of cotton planting increased this year. Judging from the cotton area in Xinjiang, the minimum cost of cotton farmers is 6.8-7 yuan / kg, and the cost of picking flowers is 1.5-2 yuan / kg, which is 15% higher than that of last year.

To sum up, the world cotton inventory consumption ratio in 2010/2011 is the lowest level since 1994.

China's cotton production is expected to be reduced by about 1 million tons this year. Cotton demand is still strong, and rigid gap will form strong support for cotton prices.

The new cotton market will not cause any impact on cotton prices. It will probably be the outbreak point of price rise, and the cotton bull market will continue.