"The sword of Damocles" hanging over the global cotton market

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The door-to-door said that the overall reserve policy has led to the homogenization of global cotton trade and procurement decisions, and ultimately indirectly accelerated bottoming and helped to amplify the market's rebound and speed.

As early as the end of 2013/14, the market has been discussing how to solve the problem of China's reserve inventory. Because in the history of cotton, there has never been a country that has a ratio of about 200% of its annual annual inventory consumption ratio, and at the same time, it has reached a level of 12 million tons of global annual production. Therefore, the sales and destocking of the 12 million tons of daily inventory should be regarded as the sword of Damocles hanging over the global cotton and even the textile market.

In history, every country has a large amount of stocks to solve the problem often with China's short-term export of large quantities of cotton to the international market, deeply suppressing the global cotton price and ultimately suppressing the vicious cycle of supply. What makes people laugh and grieve is that every time China exports a large amount of surplus supplies, it is the day when the global cotton market bottoms out. Therefore, the relevant departments should be prepared from the beginning to the end, in order to avoid the simple and rude de-stocking history lessons.

Looking back on this process, China’s preparations for the current round of reserve destocking are now released to the domestic and foreign markets as a responsible signal to relieve the pressure of slow release of internal and external spreads. This is also the expected management and final policy of the relevant departments. Implement a consistent line of words and deeds.

Everything must have fruit. Under the favorable conditions of China's clear but slow and restrained reserve policy, foreign cotton merchants and yarn mills must take corresponding measures for their own interests. From the perspective of the mills, the international mills and the Chinese mills are similarly looking forward to the implementation of the bearish policy. Therefore, the following two types of response methods have been adopted from the air-opening period last summer to the widespread rumors of dumping in March and March:

1. Use the purchase with the purchase to control the inventory size of the raw materials in the factory; use the onCA ll method for the supply that must be locked, but try to delay the pricing to avoid the risk of falling prices.

2. Increase sales efforts to maintain cash flow and normal operation of enterprises with small profits but quick turnover. This move is also intended to control the rise in the level of finished product inventory. In addition to the above-mentioned lower raw material stocks, the international yarn mill's gauze stocks are also at historically low levels.

Correspondingly, the latter (mabres, fabrics, printing and dyeing and clothing home textiles) companies in Zhengzhou and New York futures are near high and low reverse basis and the Chinese reserve is not released in the case of a ton, it also suppresses the post-price, control procurement the amount. Therefore, in general, the purchasing decisions of the global mills have taken into account the Chinese factors to a greater extent, rather than the supply and demand situation and balance sheet of each production and sales place in the current year, which has hidden hidden dangers for the lack of buffers in the market changes in the later years.

In terms of international cotton merchants and cotton producers in the country of origin, China’s policy power is even more awesome, especially as some of them have experienced the ups and downs of the market caused by China’s two large export reserves in history, and they are starting from the balance sheet. Considering the supply and demand problem, the overall situation is bearish before the huge reserves are digested, and a strict hedging strategy is strictly implemented.

It is extremely difficult for international cotton merchants to be because the 15/16 major cotton producing countries in the northern hemisphere have suffered from severe droughts and high temperature and drought, resulting in a decline in production. Therefore, farmers and trading companies in the country of origin are naturally selling at a high price. The above-mentioned international yarn mills and terminal buyers' use-and-buy strategies have limited the purchase price, and the sales of international cotton merchants are hard to pick up.

Therefore, the market presents an obvious pattern of buyer's market behavior. When it comes to the basis, it turns out that the international cotton merchants have a high purchasing base, but the sales basis is constantly discounted. This market feedback has deepened the cotton market's negative judgment on the market.

Therefore, when we look back at the end of the current year, it is obvious that the South Asian subcontinent headed by India and Pakistan has been exporting domestic cotton in the early stage due to the compact balance of the whole year. This is the phenomenon of continuous emptying in the later period. A major decisive factor. However, the participants who struggled daily in the early market weakness, whether it was the cotton producers of the origin, the international cotton merchants or the local large and small yarn mills, did not have enough knowledge of their dangerous situation. Of course, in a sense, this is a complete perspective of God.

In general, before the official launch of China's reserve policy, the global mills and supply chains consumed a large amount of supply in a weak price and the rhythm of use-and-buy, while in the entire industrial chain of cotton-yarn-cloth. A large amount of destocking has taken place regardless of the country, in order to meet the imaginary "China's reserve sells a big profit."

The development of the next market is as dazzling as a daily trip. In retrospect, it is only the result of the hidden dangers.

With the delay in domestic auctions, and then the vicious chain reaction of the “popping and falling” in the Chinese population has become a strong bottom-selling market, the participants in the entire market have been rushing to make up. The goods and the on call purchase in the early stage of pricing have injected a steady stream of support and procurement into the market.

What is frightening is that at this time, whether it is from the balance sheet or from the actual situation of the country, the inventory of the remaining goods in the year, whether in the form of cotton or cotton yarn, suddenly became very few. The delivery of the market is basically in accordance with the Chinese yarn mill replenishment library - India yarn mill replenishment library - Vietnam Indonesian yarn mill replenishment library - Indian yarn mill Pakistani yarn mill continues to replenish the library - Vietnam yarn mill and Bangladesh yarn mill have returned to the rough rhythm all the way Pass it down.

It should be pointed out that in the process, the Indian market actually conveyed to the world through price signals for two months, the price signal that the domestic supply may have a huge deficit, but the vast majority of cotton merchants and yarns. The factory has ignored this phenomenon.

Since the end of April, the Indian mill has a strong purchase of West African cotton, resulting in a strong support for the West African cotton and Brazilian cotton presbyopia at 800-1000 points, and the corresponding domestic prices in India are basically It reached the level of flat water with West Africa.

The market thought that this is the traditional old drama of India's former low and high, and did not pay enough attention, especially ignoring this year's CCI in India. However, as late as late mid-May, the purchase of the Indian market has already consumed the supply of the above two places; after about 10-20 days, the domestic price of India has rapidly climbed to 1500 basis basis to reach the level with the Australian cotton, thus triggering The large-scale sales of Australian cotton; as late as the end of June, the market has clearly found that the Indian and Indian yarn mills in India and India continue to pursue purchases at the 62-64 cents futures level without any waiting for market corrections. In the short 30-50 days, the sales base of 200-300 points has been improved, and it is impossible to ruin their purchasing enthusiasm.

As a result, with the USDA monthly supply and demand report on July 12, it finally confirmed that the compactness of the global supply and demand balance will extend the probability to the new year and even the first quarter of next year, and the full-scale enthusiasm will eventually lead to a comprehensive breakthrough in futures.

On the whole, although the factors of the international market are complicated, the Chinese reserve policy and the possible amount of daily distribution have become the “elements in the room” in the eyes of global traders and yarn mills. Forced the whole market to purchase and sell according to a single homogenization strategy and significantly destocking. In the end, when the Chinese policy was implemented, and the unspeakable profit was transformed from the unspeakable bad to the unimaginable bullish, the continuous and undulating replenishment of the sub-regions and sub-regions completely amplified the duration, scale and magnitude of the entire market.

Source: Zhongpu Weiye (Beijing) Trade Development Co., Ltd.