Zheng Cotton Continued To Fall Down The Space Is Not Big.

Since February of this year, Zheng cotton has been running low, even in May 11th.

Analyzing the driving factors of early fall and the main factors that affect cotton prices, we believe that the price of cotton is expected to stabilize at present, but it is not suitable for admission.

Although there is little room for the price to continue to fall, it is not a good time to build.

On the one hand, the macro risk is still relatively large, and on the other hand, there is still no sign of improvement in downstream demand.

Four factors led to continued downward price in the previous period.

We believe there are four major factors leading to the fall in cotton prices.

First of all, after the end of the current year's policy of purchasing and storage, because the new year's purchasing and storage policy has not yet started, there is no support at the bottom, and the price of the outer cotton is low. The price of Zheng cotton immediately broke down the support price of 19800.

Second, the European debt problem has been a drag on European economic growth.

Europe is the largest export area of China's textile industry, and its economic weakness has affected the export volume of China's textile industry.

The data of the 111st Canton fair show that, in the face of unfavorable factors such as sluggish external demand, rising costs, financing difficulties, trade friction and so on, although the current Canton Fair has more than 210 thousand purchasers from 213 countries and regions, it has increased by 0.17% over the 110th period, a 1.16% increase over the 109th period. The cumulative export turnover still fell for the first time since the 2008 international financial crisis.

Among them, 38125 people came to Europe this year, a sharp decrease of 11.15% compared with the same period last year.

Third, after the end of the purchase and storage, the market is very concerned about the issuance of China's cotton quotas. It is expected that the price of domestic cotton will drop when the import price is given.

Fourth, the demand for the downstream market is insufficient, and the price of cotton yarn is difficult to rise. The price of cotton in the early stage is not strong enough to return to normal yarn and cotton price differentials.

Some time ago, a large textile enterprise in Shandong raised the yarn price in a high profile, but then had to lower the price, indicating that the weak demand for downstream was difficult to drive the price of yarn up, and the anticipation of cotton rising was also a mirror.

The market is now losing money.

Some of the negative factors in the above analysis have been fulfilled, some are still fermenting, while others have changed.

Around May 10th, the market rumors that the import quotas had been issued, and then many textile enterprises were confirmed, leading to the cotton limit down in May 11th.

Europe's problems continue to ferment, and its impact on cotton imports and exports has partially appeared, but its negative impact on risky assets is continuing.

As for the other two factors, the early stage is still maintained.

In addition, the USDA report in May 10th was also negative for cotton, which has been reflected in the trend of US cotton in the same day.

Of course, there is another potential disadvantage that is the possibility of selling national cotton reserves.

Because of the massive storage and storage capacity of the state, the market has been worried that nearly 300 thousand tons of Chen cotton need to be sold.

If the development is as expected, the price of the already sluggish cotton will be worse, but I think the impact is limited.

Internal and external cotton price difference has limited influence.

At present, the import price of cotton FCindex M grade cotton is equivalent to 15489 yuan / ton, and the price of CCindex grade 328 cotton is 19222 yuan / ton, and the price difference is 3733 yuan / ton.

From the historical perspective, it belongs to the price range.

Judging from this year's situation, we think the price difference of 2000 - 3000 yuan / ton is a reasonable interval.

Because domestic purchasing and storage policy and import quota management have widened the internal and external spreads. At the same time, the cotton price fluctuation interval is no longer 10000 yuan to 18000 yuan per ton, but is maintained for 18000 yuan / ton for a long time, so the widening of the price range is understandable.

Then from the price difference of 3000 yuan / ton to 3000 yuan / ton, it can be the internal market continues to fall, or the price of the external market is rising, or both.

In the case of potential new negative factors, we think the second possibility is larger, that is, the cotton rebound.

Combined with the above factors, we believe that there is little room for the current price to continue to fall.

But this is not a good time to build.

We need to focus on several indicators to guide our operation.

One is the standard & Poor's VIX index, which is used to indicate the macro risk. If it can be stabilized below 20, it may be able to do more single operations. The other is the fluctuation of downstream yarn prices can reflect the situation of terminal demand. If the price of yarn has improved, it means that downstream demand may have a turning point and cotton prices can rise healthier.