Cotton prices where to go after purchase and reserve end

April, this year’s cotton purchasing and reserve work came to an end, the policy factors that support cotton prices weakened. For some time, how the cotton price will change has become the focus of widespread concern of the industry.

Sufficient inventory suppressed the price of cotton

In addition to national inventories are at high, the current commercial, industrial stocks are also high. According to the survey of the China Cotton February, domestic cotton business inventories is 3.43 million tons (including the import cotton and cotton in the circulation, excluding the State Reserve cotton), an increase of 180,000 tons compared with 3.25 million tons by the end of January .

According to China Cotton survey results on cotton textile industry, the business inventories in February were 858,600 tons, compared with 841,700 tons in January, an increase of 2%. So even without considering the enterprises have not been investigated, industrial and commercial inventory total of at least 4.28 million tons.

International cotton prices much lower than the domestic cotton prices, a large number of traders to arbitrage, resulting in the backlog of cotton in many ports. In April, more cotton is expected to arrive, so that the spot market inventory will still increase.

Let’s do the calculation, the domestic cotton production is expected to reach about 7.3 million tons in 2011, deduction of the purchasing and storage of 3.1 million tons, the spot flow of cotton is 4.2 million tons. In general, the national textile industry will consume about 10 million tons of cotton annually, taking into account the impact of the debt crisis in Europe, the amount of cotton consumed by textile enterprises decreased by 30% in 2012, during the seven months before October 2012 when the new cotton come to market, 4.08 million tons of cotton are needed.

Taking into account the existing commercial stocks and industrial stocks a total of more than 428 million tons, in the case of foreign cotton will still arrive, the year’s cotton supply is fairly abundant.

Global cotton stocks occupy a high

2011/2012, the global cotton demand has gone through changes from shortage to oversupply. Expected 2012/2013 year, global cotton acreage will decrease over last year, but consumer demand is also subject to greater constraints due to the debt crisis in Europe. In the case that there is no major change in global climate, global ending stocks will continue to increase. Global ending stocks for 2012/2013 year is expected to or reached 12.739 million tons, an increase of 184,000 tons over the previous year, an increase of 1.4%; consumption ratio of ending stocks may reach 53%, slightly higher than last year’s 51.79%.

Stability of the macroeconomic policy not allow crash

In the consideration of macroeconomic policy, cotton futures do not have the conditions of a significant drop, the space is more limited.

This year, China will convene the party’s 18 meeting, the state’s all policies to “seek progress” as the basic starting point. The first quarter of China’s economic growth, although there are signs of decline, foreign institutions believe that China might take a hard landing, but at the moment, the economic operation is still in the controllable range.

From abroad, the Greek debt crisis has gone through March, a period which is the most prone to risk events; it is inevitable the European economy get into a long term’s tightening , but the possibility of systemic risk is quite big, will have a slow recovery process in the future. The situation in the United States, is currently in the recovery process, and for fears about the recovery instability, in March, the Federal Reserve Ben Bernanke also hinted the third round of quantitative easing is still possible.

Analyzing the recent years’ running of the U.S. cotton, it is mainly in the run between 60 to 80 cents / Ib. Since 2011 Cotton bull market, the price of U.S. cotton increased to a new level, running between 80 to 120 cents / lb. By the end of March, the U.S. cotton quoted at around 90 cents / lb. See from the analysis of the situation, the U.S. cotton fell below 80 cents / lb is unlikely, or have step by step process of stabilization in the future.