Textile and apparel industry needs to be alert to changes in cotton prices

The limited-time, unlimited-country purchase and storage finally ignited the long position of Zheng Cotton. In the middle or late December of 2011, the Zhengzhou Cotton Index began to break through the 20,500-point platform and steadily rose, but whether the cotton has continued to climb to the kinetic energy of 23,000 platforms. This is still skeptical. Although the purchasing and storage period did not end until the end of March 2012, the support effect it brought will end earlier, and the risk of a fall in cotton prices should be vigilant.

First, the speed of delivery has been weakened, and the daily transaction rate has reached a record low since the transaction was closed. There are two possibilities. On the one hand, it may indicate that the peak of cotton collection and storage should have passed. On the other hand, it does not rule out the possibility that the cotton farmers will start to start selling and reluctant to sell.

Second, the spot market is still weak relative to the market, and the downstream recovery is not obvious. Zhengzhou ** price has been activated for a long time, but the spot price rarely fluctuates. The cotton purchase price is less than the estimated cotton cost of 19,000 yuan/ton, which is only the 2011 annual low point. Although the spot price has risen slightly recently, the transaction is not very active. In December 2011, the value of China's textile and apparel exports was 21.744 billion U.S. dollars, an increase of 9.2% year-on-year, and the growth rate slowed 9.4% from the same period last year. Among them, textile export growth slowed down by 6%, and apparel export growth slowed down by 11.5%.

Third, there has been no obvious improvement in sales, and costs have increased repeatedly. In January 2012, the PMI sub-index shows that the textile industry's new orders index is below 40%, but the raw material purchase price index is rising. Reserve support is gradually receding with the arrival of the closing date, and the height of support is also easy to peak. Therefore, the optimism about the market outlook, if there is no pulling downstream demand, I am afraid that is untenable.

Fourth, technically, we see that the rising trend of cotton has not changed and the main indicators are still positive. Since the breakthrough of 20,500 yuan, the trend has been strong. At the 21,000 yuan platform, there is no need to finish the move to 22,000 yuan. However, the 22000 platform is likely to face pressure, and the current price difference is close to 3,000 points. It may also lead to more selling protection and pressure on the market.

In addition, the U.S. Department of Agriculture recently issued a warning on the supply and demand data for cotton. The February supply and demand report for February 9 showed that the opening stocks were raised by 358,000 tons, mainly because the Indian Cotton Advisory Committee increased Indian production in 2009/2010 and 2010/2011, and global production was raised by 110,000 tons, mainly due to Pakistan’s new cotton. The amount of listing increased. The U.S. Department of Agriculture also reduced its consumption by 62,000 tons. The ending inventory was adjusted to 13.232 million tons, an increase of 527,000 tons, and the inventory consumption ratio was significantly higher than the 55% achieved in the previous two years.

In the 2012 Central Document No. 1 issued in early February, it clearly established a system for the storage of agricultural products such as grain, cotton, oil, and sugar, which will provide certain benefits to domestic agricultural products. Although it is still some time before the end of the deposit collection on March 31, we also need psychological preparations for policy support to gradually decline. Although cotton is still on the upswing, the bulls on the 22,000 yuan platform may need to be more cautious.