Zhengzhou Cotton Futures In The Near Future Are Weak &Nbsp, Facing Downside Risks.

　　 The recent trend of cotton futures in Zhengzhou is still near strong and weak, although the main 1101 contract has dropped, but the price trend of the 1009 contract period continued to stabilize in recent months. The tight supply and demand of cotton fundamentals and the bad growth continue to support the price. But the author believes that the futures market will eventually be the performance of the future market expectations, and as the market digested the good news, cotton fundamentals are slowly changing, and cotton futures prices are facing downside risks.

First, the new year cotton Substantial increase in production, global supply and demand balance

The International Cotton Advisory Committee (ICAC) released global supply and demand projections in July 1st. It is estimated that in July 1st, global cotton output increased by 14% to 25 million tons. Among them, the United States and India accounted for more than half of the world's growth, and the US cotton output is expected to grow by 44% to 3 million 800 thousand tons; India's output is expected to grow 8% to 5 million 500 thousand tons; Pakistan's output is expected to grow 8% to 2 million 200 thousand tons; China's cotton production will also increase to 7 million 100 thousand tons; in addition, the output of Brazil, Australia and other countries will also increase. The sharp rise in cotton prices and the fall in competitive crop prices are the main reasons for the increase in the area.

In terms of consumption, global cotton consumption is expected to grow at 24 million 900 thousand tons, up by 2% over the same period last year. Although the global economy continues to recover slowly, the high cotton price and the restocking behavior of the textile industry chain will weaken the cotton consumption. It is estimated that the supply and demand of cotton will basically be balanced in 2010/11, and the final inventory will be 9 million 600 thousand tons.

From the data point of view, although the growth of consumption has basically digested the increase in output, it has changed considerably compared with the situation of supply and demand in 09/10. Therefore, it will show an obvious negative effect. With the gradual and clear cotton production in the new year, the situation of tight supply and demand in the market will also be eased, and the supporting force of cotton prices is weakening.

Two. Economics Still fragile, external demand is shrinking.

China and the United States released June PMI data continued to fall, showing that the global manufacturing slowdown, the market is worried about the economic recovery is intensifying. Meanwhile, the labor department released the employment report in early June, indicating that the number of non-agricultural employment increased by 431 thousand in May, the largest increase since March 2000, and the unemployment rate dropped from 9.9% in April to 9.7%. However, we can see that since the census brings 411 thousand temporary jobs, this is the root cause of the decline in the unemployment rate. In fact, the number of private sector employment increased by only 41 thousand in May. With the massive reduction of temporary workers in June, it is expected that the number of non farm payrolls in June will not be optimistic. In addition, the ADP employment data released at the end of the month showed that the number of private sector employment increased by only 13 thousand in June, and the growth rate was far below the estimated 60 thousand. On the other hand, the unemployment rate in the euro area remains high due to the EU's economic downturn. This means that the overall consumption capacity of the EU will decline, and the further impact is likely to be the shrinking demand for consumer goods such as textiles and clothing.

At present, the United States accounts for nearly 15% of China's textile exports, while the EU is China's most important export market, accounting for 16% of China's trade. At the same time, the European Union is also the largest market for textile and clothing exports in China. The author believes that, as the impact of the euro depreciation may lag behind, China's export growth rate will be reflected in June, which may drop by about 5%.

Three. Domestic cotton Terminal demand faces more uncertainties

1, the cost is rising, and the demand for raw materials is reduced. Because domestic cotton 95% is used for spinning, the crazy rise of raw material prices has cut down the profit of enterprises in the middle and lower reaches of the industrial chain. It is estimated that if the price of cotton increases and the price of various finished fabrics rises by 5%~10%, the profits of enterprises will be reduced by about 2%. At the same time, the labor cost of enterprises has increased substantially over the same period. The sharp decline in corporate profits will make cotton textile enterprises cautious in procurement and the rate of operation decline, while some small and medium-sized enterprises are more likely to face the situation of shutting down production, and production demand will decline.

2, large enterprises have sufficient stocks, and policy supply will balance market demand. At present, the order of large enterprises is full, and the industry concentration is further improved. Orders for some large enterprises have been extended to the end of October. But enough cotton stocks can be used before the new cotton market this year (10-11 months). Therefore, in the third quarter, the market is faced with the needs of small and medium enterprises. With the increase of cotton import quotas and the dumping of State Cotton stores, the tight supply and demand situation will be eased.

On the whole, the change of the supply and demand of the global cotton market is slowly proceeding, and when the external market has not yet fully recovered, the market terminal consumption will be obviously suppressed, and the textile as the producer goods commodity is at the front end of the industrial chain, the pressure it will face will eventually be transmitted to its raw materials, and the price of cotton will also face downside risks.