Hello everyone, I am the little master sister, today I invited Teacher Shede to share his views on cotton for us.
Cotton is an important commodity involving the two major industries of agriculture and textile industry, and it is also one of the earliest agricultural products listed in the futures market and the longest trading time. Futures market legends, Lin Guangyuan and Fu Haitang, both left a classic battle on cotton futures in 2010.
Nowadays, although the cotton futures are not as magnificent as in 2010, since April last year, the main cotton contract has been stronger, especially in late September this year, a wave of sharp pulling, pulling the cotton plate price to a high range of 21,000-22,000, but on this high post, cotton has also stood for more than 1 month.
Today, we will make a simple analysis of the industrial pattern and current situation of cotton, and see what makes cotton hesitate after reaching a high level of nearly 10 years.
First of all, from a worldwide perspective, the main cotton growers in the world are the United States, India, China and Pakistan.
Since 1961, the world's cotton planting area has been between 450 million and 500 million mu, the fluctuation range is not large, but with the improvement of the level of science and technology, the yield of cotton per mu has been increasing, and the total output of cotton in the world has increased from 10 million tons to about 27 million tons. According to the USDA, global cotton production in 2020 was 24.852 million tons, down 1.736 million tons from 2019; global cotton consumption was 25.519 million tons, an increase of 3.179 million tons from 2019. The shortfall is adjusted by the inventory of the previous year.
The United States is the world's third largest cotton-producing country, but due to the high cost of American manpower, a large number of textile companies have moved abroad, so in recent years, the domestic cotton consumption in the United States has continued to shrink, making the United States the world's largest cotton exporter, and its cotton export volume accounts for 36% of global cotton exports, far exceeding Brazil, the second exporter of cotton.
India is the country with the largest cotton planting area in the world, with more than 120 million mu of planting area in recent years, accounting for more than 35% of the global cotton planting area, and its output in recent years has also jumped to the first place in the world.
The textile industry is a very old industry in India, india has a huge population, its cotton consumption is also ranked second in the world, and its export volume ranks third in the world.
Brazil's cotton cultivation area is not large, but its unique climate and agricultural resources make Brazil's cotton production rank fourth in the world and its export volume ranks second in the world.
In addition, Baquista is also a cotton grower, with an annual cotton planting area of 2.5-3 million hectares, accounting for 7% of the world's cotton planting area, and is also the world's third largest cotton consumer and second largest cotton yarn exporter.
Looking back at China's cotton production and marketing, cotton also has a long history of planting in China, and the relevant national policies have a very big impact on the supply and demand pattern of domestic cotton.
From 2011 to 2014, the state implemented the temporary cotton storage policy, a large amount of cotton entered the national reserve inventory, the national reserve cotton inventory exceeded 10 million tons in 2014/2015, and the national cotton production plus imports of 7.96 million tons in that year, while the consumption was only 7.25 million tons. After that, the temporary storage policy was changed to a direct supplement policy, and the price of cotton was gradually in line with the market.
Due to the differentiation of the direct supplement policy in different planting provinces, China's cotton cultivation is mainly in Xinjiang, and in the past two years, Xinjiang's cotton production has accounted for more than 90% of the national output.
In recent years, China's cotton consumption has ranked first in the world, and its output is slightly lower than that of India, but there is basically no export. According to the USDA data of the US Department of Agriculture, China's cotton production in 2020 is 6.314 million tons, and the consumption is as high as 8.6 million tons, of which the gap is made up by the reserve cotton and imports.
In terms of import policy, the current import quota policy, the import tariff rate of cotton within the quota is 1%, with the additional implementation of the sliding tax system, and the tax rate sliding range is 5-40%. This year, the import volume within the cotton quota remained unchanged at the 894,000 tons promised by China's accession to the WTO, while the additional import volume was guaranteed to ensure that the domestic cotton market price was affected by the fluctuations in the international market price as little as possible through the sliding tax system.
After combing the international and domestic industrial supply and demand pattern of cotton, we can have a rough outline, when analyzing the domestic cotton price trend, the focus should still be on the domestic cotton supply and demand relationship.
According to the latest balance sheet of the China Cotton Association, in the past two years, the gap between domestic cotton production and demand has been relatively large, reaching about 2.5 million tons.
Since more than 90% of China's cotton production comes from Xinjiang, and by xinjiang's overall cultivated land area, water resources and other restrictions, in recent years, due to environmental protection problems, state-owned original wasteland, black land, etc. have been required to return farmland to forest in a certain proportion within a few years, Xinjiang's overall cultivated land area will show a downward trend, Xinjiang cotton planting area also tends to be saturated, so the increase in Xinjiang cotton yield depends more on the increase in yield.
Especially during this year's cotton sowing period, Xinjiang encountered relatively bad natural weather, resulting in some areas having to carry out secondary sowing or even multiple sowing, and the total output continued to decline compared with the previous year.
On the demand side, due to the epidemic in the past two years, a large number of overseas orders have poured into the country, making demand always at a high level, and the gap between production and demand has brought about a hot cotton sales and high prices. This year, there was even a scene of cotton picking machines in Xinjiang cotton fields just getting off the ground, and cotton buyers and people from spinning mills ran to the fields to grab cotton.
Although the imported cotton within the quota has a price advantage, the import volume is limited, which does not have a big impact on the overall cotton price.
According to the balance sheet of the China Cotton Association, the import volume is expected to be close to 2 million tons this year, but because the price of foreign cotton is also high this year, under the adjustment of the sliding tax, the price advantage of imported cotton is not obvious.
In addition, from the supply side, the central reserve cotton in 2021 will be rotated out and released continuously, from July 5 to September 29, the cumulative transaction volume of 630,800 tons, the turnover rate is 100%, the first batch of cumulative transactions from October 8 to November 9 is 395,600 tons, the turnover rate is 61.19%, and the second batch of release began on November 10, with a total planned listing of 600,000 tons, including Xinjiang cotton in 2019 and imported cotton in 2018-2020. Textile enterprises actively participate in the reserve cotton auction, and the amount of reserve cotton sold by some spinning mills can be used normally by the factory for 2-3 months, which effectively reduces the cost of cotton.
However, at present, the proportion of imported cotton and Xinjiang cotton is not high, and the actual transaction price is basically attached to the new cotton in Xinjiang, which leads to the decline in spot prices caused by the current dumping.
Back on the disk, the cotton 01 contract fell into a state of glue after entering the price range of 21000-22000. On the one hand, due to the new cotton in Xinjiang entering the centralized marketing period, the purchase price of seed cotton has declined, coupled with the replenishment of the national reserve cotton, the shortage of supply in the early stage has been improved, and the action on the disk is insufficient.
On the other hand, the disk surface has not moved for the time being under the background of still a large discount (about 1300), and the short-term return to the future is affected by the disk surface with a strong shock.
Disclaimer: Futures are risky and investments should be done with caution. The above content is not used as an investment basis and is for reference only. The content of this article is based on publicly available information, but the accuracy and completeness of such information is not guaranteed. The author may supplement, revise or update the information from time to time, but does not guarantee that such updates will be published in a timely manner. The content and opinions in this article are based on the results of an analysis of historical data and there is no guarantee that the contents and opinions contained will not change in the future. This article is for informational purposes only and is not in any case intended as investment advice for anyone.