The Death Of Domestic Cotton Market, No Longer In 2014 Horse Year

　 Purchase and storage to make up for this year's "test water"

Cotton plays an important role in our national economy. Since 2011, China has begun to implement temporary cotton purchase and storage policy. With the increase in storage and storage, the negative effect of cotton purchasing and storage policy is beginning to show.

In response to the problems, the cotton policy reform, which is very loud, has been put into practice this year, which has led to the expectation of the industry. Affected by this, what changes will happen in the cotton futures and spot market in the future? This will comb out the market's criticism of the old policy and the expectation of the new policy.

　　 Negative effects of cotton purchasing and storage

In 2010, domestic cotton prices fluctuated fiercely, which made cotton growers and producers suffer great risks. Relevant departments subsequently promulgated the cotton temporary storage policy, hoping to stabilize cotton prices by collecting and storing, stabilizing the market expectations of cotton producers, operators and cotton enterprises, protecting the interests of cotton farmers and ensuring market supply. However, the implementation of the policy has deviated from the original intention. Cotton purchasing and storage has not raised the enthusiasm of cotton growers, and the downward trend of domestic cotton planting area is still continuing. According to statistics, the cotton planting area decreased by 6% in 2012 to 74 million 80 thousand mu, and in 2013, the planting area of cotton was 70 million 650 thousand mu, which decreased by 4.6% compared with the same period last year.

"It is difficult for the state to purchase and store the price to pass to the cotton farmers at the forefront of the industrial chain, and the cotton farmers have not received any tangible benefits." Wang Yong, a cotton researcher at Hongyuan futures, said that some of the lint processing enterprises have become beneficiaries of the national cotton reserve because of the purchase of lint after seed cotton processing. In general, the processing enterprises buy seed cotton from the hands of the cotton farmers at a price lower than the price of the harvest. As long as the purchase and storage are open, the processing enterprises can continuously earn the price difference. It can be said that the policy of collecting and storing has given the lint processing enterprises the opportunity to "lie in counting the money".

In this regard, Wuhan, Hubei, a cotton enterprise business personnel also feel deeply. He said that before and after 2012, the average price of cotton seeds sold by cotton growers was 7.7 yuan / kg, which was stored at 19800 yuan / ton, and cotton processing enterprises had more than 1000 yuan per ton.

"On the surface, the policy of collecting and storing is conducive to the stability of the cotton market and has kept the trend of cotton prices going down. But this policy is right. Spin The enterprise has caused great damage, causing a huge price difference between inside and outside cotton. " Wang Yong said that the price of lint at home and abroad is about 4000 yuan per ton, and the domestic cotton price is far higher than that of foreign countries. This makes the domestic cotton textile enterprises high production costs, and simply can not compete with foreign cotton textile enterprises.

"There are many factors that cause the huge difference in cotton prices between inside and outside the country. The most important thing is the state's policy of purchasing and storing and the import quota management system." Sun Liwu, an information cotton analyst at Zhuo Chuang, said that in 2011, because of China's policy of purchasing and storing, the domestic cotton price declined slowly, and the difference between inside and outside cotton prices was prominent. In addition, domestic and foreign cotton production cost difference is obvious, foreign cotton cost low and high quality, domestic cotton planting cost is high, but the quality is not as good as cotton. Domestic cotton import quota control also makes the domestic and foreign cotton market unable to develop freely and evenly. "As of February 14, 2014, according to the sliding tax conversion, the difference between domestic and foreign cotton prices will still be as high as 3603 yuan / ton, if the tariff is 1%, the difference will be as high as 4689 yuan / ton.

The policy of purchasing and storage has broken the price formation system centered on market mechanism. The domestic cotton price is based on the cost of storage and purchase, and the "high price cotton" has made the downstream textile enterprises suffer from "internal injury".

"Raw material prices account for textiles. clothing The cost is about 60%, or even about 70%. Sun Liwu said that the high price of domestic and foreign cotton remained high, leading to the loss of raw material cost advantages of domestic textile enterprises, and the gradual increase of domestic labor costs. The textile and apparel products with lower cost in Southeast Asian countries are constantly hitting the domestic market and occupy the share of the international market, which is the "trauma" of domestic textile enterprises.

Li Zhong, the head of a medium-sized textile factory in Henan, admitted: "the difference between domestic and foreign cotton prices is 4000 yuan / ton, and textile mills are under tremendous pressure of price. Of course, we can get import quotas, auction 3 tons of cotton stored in the state, and get 1 tons of import quotas, but this is not much help for enterprises. "

In the Henan Zhengzhou Textile Industrial Park, reporters interviewed employees of a medium-sized state-owned textile enterprise. One employee disclosed that the current operating rate of the enterprise was only about 60%. The best time before was the "three shifts". Now the day shift is over, and the staff salaries have not gone up for many years.

Quota system provides rent-seeking space

Import quotas seem to be a good medicine for textile enterprises to alleviate their pain, but in fact it is not. Mr. Zhao, who had run a small textile mill, told reporters that cotton import quotas had made a lot of trouble for small and medium-sized textile enterprises. Last year, Mr. Zhao's factory start-up rate was less than 50%, only to meet the needs of large customers, and the rest of the capacity was idle. It is very easy for qualified state-owned large enterprises to get the quotas for cotton imports. If we want to get the quotas, we can buy high prices from the market in the first few years, and now we can't buy them. Mr. Zhao has no choice but to say that in the past two years, the cotton import quota has been getting tighter and tighter, and the management has become more and more strict. It is understood that Mr. Zhao's textile factory went bankrupt last year due to serious losses.

It is understood that after the cotton purchase and storage policy was promulgated, there were a large number of import quotas circulated on the market in 2012, and the price was higher and higher, the highest level was 3800 yuan / ton. In this regard, Wang Yong explained that some enterprises applying for quotas did not have substantive cotton spinning production and trade. They did not need to import cotton, and they could get quotas and resell them. In addition, some enterprises falsely report the volume of production trade, apply for cotton import quotas higher than their own capacity requirements, and then sell surplus quotas. The departments concerned have promulgated a series of systems and strictly stipulated the qualification of enterprises that can apply for import quotas, that is, only state-owned enterprises can apply for import quotas. It is precisely because of this regulation that many private textile enterprises are more difficult to manage. "In the final analysis, the problem of quota system is derived from the policy of purchasing and storing up." Wang Yong said frankly.

"Large state-owned cotton enterprises can barely catch up with the import quotas, and small and medium-sized cotton enterprises are basically losing their state every year." Wang Yong said that the textile industry was originally an industry with small profit margins, low added value and fierce competition. The policy of purchasing and storage has undoubtedly made it worse and worse, making it even more difficult for the textile enterprises that are facing difficulties in operation.

　 Who extinguished cotton futures?

In the process, the biggest victims of the cotton industry chain seem to be the textile enterprises. The biggest beneficiaries seem to be lint processing enterprises. Is this really the case?

"The price difference between the storage price and the cotton price in the circulation market leads the lint processing enterprises to actively pay for the storage. This makes domestic cotton resources flow into the national treasury in the storage period. Wang Yong said frankly that the government that holds the giant Ling deposit is capable of regulating the domestic cotton market and turning it into a cloud. In this case, the biggest victim is not the single entity in the industrial chain, but the cotton price formation mechanism. A large number of purchasing and storage destroyed the original market mechanism, and triggered a series of adverse reactions in the industrial chain. And the futures market based on market mechanism can best reflect this adverse reaction.

"Cotton futures have the function of finding prices, such as US cotton futures has been an important reference index of global cotton prices." Wang Yong further said that the cotton futures of Zheng Shang also have such a function. However, since the implementation of the purchase and storage policy, the position of Zheng cotton futures has shrunk sharply, and the stars of the past have gradually fallen.

Judging from the situation of domestic cotton futures listed in 2004, the biggest wave came from 2009. At that time, the US cotton futures price had been on the rise, rising from the lowest 39.48 cents / pound in 2008 to 70 cents / pound. Here, Zheng cotton futures began to appear more than 100 thousand hands per day in total positions. Many industrial customers have a keen sense of smell. They realized that the international cotton price "roller coaster" market is about to start and have entered the futures market for risk management. Since then, Zheng cotton's holdings and volume have surged, becoming the most active variety in the futures market at that time, with long-term holdings at more than 400 thousand hands, reaching 800 thousand hands at the highest level, and reaching 3 million 400 thousand hands at a time. At this time, the US cotton futures position has been maintained at the level of 150 thousand to 200 thousand hands. {page_break}

　　 Zheng cotton On the one hand, this activity shows that the function of the futures market is gradually being discovered and utilized by enterprises. On the other hand, it also shows that the price of cotton is still determined by the market, and the spot price depends on the market mechanism, while the futures price is close to the spot price and plays the role of price discovery. However, because of the sharp fluctuation of cotton prices, many operators of the cotton industry chain suffered huge losses. The departments concerned also chose to intervene in cotton prices in 2011. A visible hand began to spread into the cotton market, but also extended to the futures market.

Starting from the implementation of the cotton temporary storage policy in 2011, Zheng cotton trading began to decline sharply. Within two months, the volume of turnover fell from 500 thousand to 50 thousand, and the position of the warehouse also declined significantly. "Zheng cotton turnover and holdings have been shrinking until now. Affected by the policy of purchasing and storage, the futures participation degree of related enterprises has been greatly reduced, and the operation of the industrial chain has become "simple and crude". The market mechanism has become the biggest victim of the policy of collecting and storing, including enterprises that rely on market mechanisms, including futures markets based on market mechanism. Wang Yongru said.

　 Direct subsidy "change" brings Cotton City hope

At the beginning, the policy of purchasing and storing in order to stabilize cotton prices and protect the interests of cotton growers seems to be a node that must be changed. In 2014, it is expected to become the "innovation year" of China's cotton industry. The change of regulatory policies will bring a turning point for the whole industrial chain.

Last year, the cotton Working Committee, set up by the China Federation of textile industry, put forward a policy proposal for cotton farmers' direct subsidy to the State Council after careful investigation in major cotton producing areas in China. It is suggested that Xinjiang should be subsidized by 100 yuan to 120 yuan per mu of cotton, which is directly paid to cotton farmers. Since then, the Central Document No. 1 issued in early January of this year has put forward for the first time the pilot project of "target price subsidy" for cotton in Xinjiang.

"In the third Plenary Session of the 18th CPC Central Committee, we emphasized that the reform of the economic system is the key to comprehensively deepen the reform. The core issue is to deal well with the relationship between the government and the market, and put forward a unified, open, competitive and orderly market system so as to make the market play a decisive role in the allocation of resources. The determination of the government to change the market has seen the hope of the cotton market." Wang Yong believes that there may be three changes in the cotton market in 2014: first, the weakening of the state's control of the cotton market and the full return of the price; the policy orientation will only protect the interests of farmers, will not protect the market price, change the storage to direct subsidy; two, the examination and approval authority of cotton processing qualification will also change, and do not rule out completely liberalized; three, the cotton quota management method will be more flexible.

The purchase and storage will become a direct subsidy or will become an important reform measure to restore the cotton price formation mechanism, and it will also re energize cotton futures. However, the so-called "direct subsidy" is not just a simple sentence. How to balance the interests of cotton farmers and ensure that the market mechanism is not destroyed has been bothering policymakers.

"There are three kinds of rumors about cotton subsidies in the near future." Sun Liwu told futures Daily reporters that the first is to subsidize about 200 yuan per mu according to planting area; second is to subsidize production according to output, 0.5 yuan to 0.8 yuan per kilogram; third is to collect and store with pilot subsidies, so as to maximize the protection of cotton farmers' interests. It is understood that the relevant departments of the Ministry of agriculture on behalf of the cotton planting industry and the interests of cotton farmers and the China Cotton Association tend to integrate cotton farmers' subsidies and temporary collection and storage policies.

As for the difficulties of direct subsidy policy, a responsible person in Henan's Agricultural Department said that the direct subsidy policy looks good, but it is not easy to implement. There are two main difficulties. First, the subsidy price is hard to decide. The price of cotton subsidy is too high or the planting area will be affected. The low price may lead to the decline of cotton planting area, because the degree of mechanization of cotton planting in China is far lower than that of grain cultivation, and the cost is obviously higher than that of planting grain varieties. Two, it is difficult to determine the subsidy target. Gao Fang, executive vice president of the China Cotton Association, believes that it is impossible for China to copy the American cotton farmers' direct subsidy mode. Only 20 thousand cotton farmers in the United States are well positioned, while 40 million cotton farmers in China have to ensure that the direct subsidy policy is implemented at low cost and it is difficult to distribute them accurately.

Of course, the pace of reform is always ahead. In 2014, the Central Committee's document on "target price subsidies" made the market see hope.

　　 Cotton futures are expected to usher in "spring"

The hope brought about by policy changes also affects the futures market. In the future, with the landing of the direct subsidy policy, cotton prices are expected to return to market pricing, and cotton futures will also glow with the "second spring". For the cotton futures in 2014, all parties in the market showed great expectations.

Exchanges, in addition to the continuous improvement of cotton futures themselves, its downstream products futures contract listing is also actively promoting. It is understood that cotton yarn futures are expected to debut in 2014. "If cotton futures are successfully listed, it will undoubtedly provide a more open and market-oriented platform for the whole cotton spinning industry. Cotton spinning enterprises can avoid market risks by participating in hedging." Sun Liwu said that after the listing of cotton yarn futures, the arbitrage opportunities between cotton yarn and cotton will be conducive to the long-term development of the physical industry and the futures market, and also help to enhance the activity of cotton futures.

For investors, many people are still very excited when they recall the cotton market from 2010 to 2011. They say they will enter the market again after they have changed their policies. A 10 year old individual investor told reporters, "I am very optimistic about this year's cotton futures, not because of the trend of the market, but optimistic about the liquidity of cotton futures brought by policy changes". A large number of hedge funds and speculative funds can participate in the futures contract to be active, only to have investment value. Like Mr Li, there are not many investors who want to kick off this year's cotton futures.

Of course, the core function of cotton futures is the service industry. "Looking back on the trend of cotton futures in 2013, CF1301, CF1305 and CF1309 contracts appeared in the" abnormal "market which started in the middle of the month before delivery. It seems reasonable but not reasonable. Wang Yong admitted that under the influence of State purchasing and storage policy, the cotton futures market gradually lost relevance, and industrial enterprises were unable to participate in the futures market. The fundamental reason for this is that the policy of purchasing and storage has changed the price structure of the relevant market, affected the flow of resources, and changed the competition pattern. "Therefore, the greatest significance of policy change for cotton futures is not whether it can be active, but also to re play the functions of its service industry customers, attract more entities to hedge, and avoid the risk of price fluctuations."

The US cotton futures price is regarded as the weathervane of the global cotton price. In recent years, whether it is the trend market or the oscillation market, its positions remain between 150 thousand and 200 thousand. With the gradual improvement of the domestic cotton policy, as a big country of cotton production and consumption, China's cotton futures should play a better role in pricing and keeping value on the basis of market mechanism, so as to better serve the cotton industry chain and serve the real economy.