Views On Whether Or Not International Cotton Continues To Strengthen

In the short term, the long and short game around Zheng cotton continues. These factors include

The auction price is weak and the price of new cotton is on the high side, the demand for cotton yarn is low and the ten peak season for gold and silver nine is expected.

There is also a division of views on whether the mid term international cotton will continue to strengthen.

In order to better illustrate the above arguments, we will discuss from the following aspects.

The first part, how to see the price of national cotton auction is weak and new cotton prices are high?

The state will postpone dumping until late September and downstream.

The weak demand and the dual function of enterprise demand have led to the weak volume and price of the national cotton store auction since the beginning of August, and the latest auction price of 3128B has reached 13927 yuan / ton.

On the other hand, the market generally expects Xinjiang cotton to start weighing 3128B instead of lint cotton (3128B) at 14500-15000 yuan / ton, which is expected to come from cotton farmers' reluctant sale and high quality cotton shortage. In the foreseeable future, if the weather does not damage cotton growth, the new and old cotton prices will be connected with the new year's cotton market.

First, in the first 9 months of the month, textile enterprises still have increased energy storage capacity; the current raw material stock of spinning mills is generally safe stock, that is, 20 days to 1 months or so, and a few raw materials stocks are in the range of 1 and a half months or even 2 months. As the next two weeks, the reserve price is dropping, especially after entering the traditional peak season in mid and early 9 months, the mills need to fill up the raw materials of cotton raw materials until mid October. This does not exclude a certain extent in promoting the auction of cotton reserves, and then has some support for Zheng cotton futures. However, this time window is concentrated in the first half of the month and will not last for a long time.

Second, the current market generally anticipates the high price of the new cotton scale. But if the weather is good in Xinjiang and the mainland in the next 1 months, the new cotton price will not be too long. After entering the middle and late 10 months, especially after November, there will be obvious pressure on domestic cotton spot prices. These pressures will come from the gradual weakening of the traditional peak season factors in the ten cotton spinning industry, the weakening of terminal demand in the fourth quarter, the weakening of the support for domestic yarn prices, the continued substitution of pure cotton by non cotton fibers (the above factors are detailed in the second part of this article), and the heavy supply pressure at the stage (see the third part of the article).

The second part, how to look at the golden nine silver ten peak season expectations?

At present, the demand for cotton textile is obvious in the off-season, the cotton yarn prices continue to fall, and the profits of the cotton mill have shrunk dramatically. Many textile enterprises have reached the margin of profit and loss. Even the textile enterprises with high price for buying cotton reserves have lost money due to higher cost. Nevertheless, the market still has great expectations for the traditional Kim Gu silver ten peak season. Our view is that gold and silver ten traditional cotton season will play a role in cotton spinning demand, but timeliness and intensity are expected to be lower than market expectations.

First, golden nine silver ten is expected to be strong in the peak season but short in timeliness.

The golden nine silver ten peak season is expected to be jointly completed by G20 printing and dyeing enterprises after the G20 summit, the cotton textile industry chain supplement, and the growth of orders in the busy season.

　　首先，由于G20峰会因素，过去一段时间国家人为干预浙江印染企业停产力度大，峰会以后9月中下旬这些企业的重新开工将带动需求阶段性修复，但就旺季订单而言，在国内外需求疲弱态势下，订单不会大爆发而只是有限好转;其次在上述因素下，进入9月棉纺产业链条补库有望进行，但是力度低于预期：这主要源于随着新花大量下市，旺季来临时候全球棉花供应会很充裕，而中间环节的纱厂原料库存将在全年维持安全库存不会多补，近期纱线库存有所增加，短期内还在累积之中，而坯布产成品库存均不断抬升近期，唯一低的库存在于坯布企业纱线原料库存很低，单靠这一个环节很难翘动全产业链;同时由于前期由于各种因素中国抛储政策未被按计划执行，由此带来的棉花价格上行带动了棉纱价格上行，这个过程中无论是棉花贸易商、还是纱线贸易商都囤积了一定

Quantity of cotton, which Cotton Traders hoard about 300 thousand tons of cotton, this part of cotton and yarn stocks are expected to hit the market in the coming season, will weaken the entire cotton textile industry chain replenishment market;

That is to say, the peak season factor has a certain degree of support to the spot and futures, but the effective time window is very short. At the same time, the support for cotton spot and futures prices in the peak season will decrease from month to month, because the consumption of cotton spinning terminal in the fourth quarter is expected to go down further.

Second, the demand for cotton textile and home textile terminals is weak in the fourth quarter.

　　首先就内销来看，服装零售呈现量减价增局面：7月全国百家重点大型零售企业服装零售额同比增长6.2%，增速较上月提高1.7个百分点，较上年同期提高8.8个百分点，这主要是由服装价格上涨所致，而非销售量作用，7月服装零售量同比增长2.8%，增速较上月下降1.7个百分点，较上年同期下降3个百分点;这组数据折射出中国包括棉纺服装在内终端需求疲弱的结构性顽疾：中国经济未来的路越来越难走，实体经济的整体低迷与金融风险上升伴生而行，终端整体消费面临低迷;而未来经济刺激政策空间也有限：金融资产和房地产泡沫使宽松货币政策投鼠忌器，而债务压力和税收大幅削减也使宽松财政政策也难超预期，进入四季度中国经济重心滑落不可避免，居民可支配收入下滑以及居民房贷大幅增长势必在未来几个月持续挤压包括棉纺服装在内的终端需求，而房地产在四

Quarterly downturns will also inhibit home textile consumption.

In terms of external demand, it is still in the doldrums: from the latest data, the import of American clothing slipped in June, and the number of clothing imports fell 1.33% in June, and the total import volume of clothing fell by 6.1%, mainly due to the sharp decline in the price of imported garments. In June, the average price of imports of garments in the United States dropped by 4.8%.

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Third, the strength of outer yarns will weaken.

　　今年由于印度减产印度国内棉花价格不断走高，同时巴基斯坦国内棉花减产也很严重，大量从印度进口棉花使印度国内棉花价格进一步上行，这些因素，当然还有其它因素共同带动了国际棉花价格，棉花价格的不断走高使国际棉纱价格节节走高，甚至超过了中国国内棉纱价格，这使中国棉纱性价比凸显，国内需求量增加，而国内前期抛储政策的“扭曲”也使中国抛储价格大幅上涨，这也支撑了国内棉纱走高;也就是说，在全球棉纺产品终端需求没有明显好转情况下，国内外棉纱价格坚挺和由此形成的相互支撑很大程度上是由棉花原料成本端刺激导致的：但是随着中国抛储延迟和全球棉花集中上市临近，中国和美国棉花价格均出现明显回落，依托棉花原料成本端支撑大大弱化，国内外棉纱价格一起走弱;在可预见未来，如果全球主产棉区天气不发生大的破坏，随着1

0 months later, the global cotton supply will continue to concentrate, and the cost of cotton yarn will be hard to sustain. The price will return to demand side. Under the background of the difficulty of global terminal demand, the price of internal and external yarn is expected to compete again in the fourth quarter. This will create pressure on domestic and foreign cotton spot and futures prices.

Fourth, the substitution effect of non cotton fibers will continue to strengthen.

The cotton price is higher and the substitution effect is further strengthened. From the chart, we can see that the proportion of pure cotton yarn in India and Pakistan is higher than that in blended yarns, which is also reflected in the proportion of cotton replaced in the countries. In June, the import of pure cotton garments decreased by 2%, while the import of non cotton fabrics decreased by 0.4% compared with the same period last year. The average price of cotton garments fell by 5.6% compared with the same period last year, and the average price of non cotton garments decreased by 3.6% over the same period last year. This shows that the demand for global pure cotton clothing has declined and the replacement of pure cotton has also been strengthened as the global cotton price has reached a high level. In the past few years, the trend of pure cotton being replaced by non cotton fibers has not changed.

The third part, how do we look at the impact of the mid-term international cotton prices on Zheng cotton?

If viewed from the static supply and demand balance sheet, as shown in the following figure, may be in the future cotton new year's back end may be, especially in India cotton planting and harvest time pull long, the next few months, the weather change is still the uncertainty of India production change, but there are also uncertainties. First, in the global economy is still weak, especially the Chinese economic center of gravity continues to fall, inevitable situation, the future cotton spinning terminal demand rate will face a severe test. Second, the international cotton in the medium term is also facing the pressure of China's inventory. In view of this year's experience and lessons, the new cotton annual storage is expected to be smoother than this year. If the March plan of dumping and storage in accordance with the national plan, this will bring pressure on the international cotton prices will be greater than this year. First, one of the factors currently supporting Zheng cotton futures is that some market participants believe that international cotton prices remain strong in the medium and long term.

　　第二，关键在于年度供需平衡表不会对整个棉花年度各个时段都有作用，在第四季度，在全球棉花陆续集中供应背景下，中国棉花价格更多是由中国国内自身供需所决定;本年度新疆棉产量预计360-370万吨，内地60-70万吨，本年度新花产量在420-440万吨，每个月用棉需求即便按照上限的60万吨来算，10月份到2017年3月抛储前(国家计划抛储的时间)的5个月只能消耗300万吨，这还没有算进口的89.4万吨的进口外棉，如果3月份抛储，余下的棉花怎么消耗?按照国家前期文件表述，国家在新花下市后有轮进新花可能，按照今年抛储量，按市场价格轮入量可以达到60万吨，但是我们必须清楚，国家轮入的目的是什么?优化储备棉质量结构和抵制棉花价格过低，如果新花开秤成本在14500或以上，轮入的可能性几乎没有，第一不利于产业良性发展，在高价位轮储不仅仅给纱厂经营带来压

The force will also bring hidden dangers to the country. If the spot price of cotton does not drop sharply and sell cotton, it will be difficult to implement the policy of short term storage after the supply of new flowers. That is to say, from October to the first two months of 2017, the supply pressure of cotton will be great. Once the pressure of the supply side is superimposed with the weak demand, once the futures price rises significantly, the futures warehouse receipt pressure will be brought into full play. In the case of the price of zhengmian in January and May, the January contract is expected to be the main target of selling the warehouse receipts in the future.

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The fourth part, what are the other factors that affect the trend of Zheng cotton futures?

Commodity resonance will drive its price trend, especially in the context of current liquidity. The strength of programmed trading has largely exceeded the subjective paction in commodity futures market. Therefore, the kinetic energy and probability of the rise and fall of commodities are larger than before. Therefore, considering the cotton futures investment process, in the fourth quarter, besides commodity property of cotton, the dynamic direction of commodity futures as a whole asset sector is a factor we must consider. Especially, we are not optimistic about the trend of Zhengzhou cotton in the four quarter. We also need to see whether other commodities have bull market energy or stage resonance rising kinetic energy, so as to avoid the risk of single breeds caused by the resonance rise. Zheng cotton futures is a member of commodity futures.

First, from the medium term general direction: Since World War II, the bull market / bear market pformation of commodities has undergone several cycles in the big cycle, and the basic bull market has been 10 years, and then accompanied by a 20 year bear market. At present, we do not think that commodity futures can enter the bull market in the foreseeable future. The reason is that compared with the previous commodity futures bull market: 1, the start of any commodity futures bull market requires a long period of economic recession in the world, leading to the effective elimination of bulk commodity capacity. Once the economy enters a cyclical recovery, the shortage of supply and demand is strong, triggering a commodity bull market.

However, for the moment, the capacity of the supply side of commodities on the global level is stiff and immortal, and it is not effective to clear up the price. The rise of prices will easily lead to an increase in supply stage. At the same time, the global economy is still weak and the effective demand for commodities is not enough. 2, any big cycle bull market must start with the demand side. For example, in the 2000-2011 year bull market cycle, China's leading emerging markets are integrated into the global economy, the process of industrialization is speeding up, the demographic dividend and other factors are important factors, but for the moment, China has entered the middle and late industrialization stage, and the productivity of the developed economies such as the United States has staggered, and at the same time, Europe and Japan are also facing aging.

全球经济增长在未来几年甚至更长时间都将陷入低迷的常态!因此需求端并不支持大宗商品牛市的到来!3、通过对比历史上的大宗商品牛市，我们还发现每次大宗商品的牛市都伴随着货币供应的宽松，但是这有一个前提条件，就是需求端必须给力配合，除了我们上面所说的需求端在相当长时间维持低迷的原因意外，当下工业生产低迷是我们不看好未来需求的一个重要指标， 大宗商品牛市中价格暴涨阶段几乎都是发生在工业生产高速增长的年份，因为这项是大宗商品需求影响最大的子项，而全球经济由于结构性原因，工业生产均不处于扩张期，中国尤其如此，由于全球经济结构性失衡还在继续，工业生产数据尤其是其中的大头(制作业)还要持续很长时间低迷，这种背景下，大宗商品价格即便在货币整体宽松的背景下也难有持续性上涨动能!

The production capacity goes to stock and the supply side begins to shrink. On the basis of this, the upgrading of industrial prices is, to a certain extent, passive. The higher the price of industrial products is, the fiercer the competition and confrontation between the planned economic means and the powerful market forces. In the two power game, the spot price of industrial products is basically strong at the end of Gervi's strength, and has no continuous upward momentum; and for the agricultural products at the end of the supply window, when the weather uncertainty time window is closing down (of course, the South American agricultural crops and India cotton are subject to more prolonged weather tests), the price trend is more dominated by weak demand. Second, the commodity futures in the medium term will not be able to have a systemic bull market performance for a long time in the future. It will be a broader shock. In the fourth quarter, we think that the kinetic energy of the resonance of commodities will basically dry up and the supply side reform will go down.

　　第三，郑棉期货作为大宗商品期货一员，价格走势离不开货币宽松等政策左右，货宽和资本市场流动性泛滥一直是过去1年左右商品期货市场一个重要因素，就未来来看，全球流动性泛滥事实依然存在，但是货币宽松政策国内外都会低于市场预期：国外来看，负利率环境给银行体系带来的负面作用和宽松货币政策对于实体经济刺激边际作用不断递减使欧日货币宽松政策基本难有进一步空间，而中国资产泡沫、人民币贬值等因素也使潜在的货币宽松政策投鼠忌器，难有作为;也就是全球货币宽松对于包括棉花在内大宗商品期货价格进一步刺激有限;只是市场宽松的存量资金利用阶段性大宗商品自身产业链因素来进行投资考量;在需求整体疲弱背景下，资金对大宗商品炒作只能只能从供应端的天气破坏、限产、停产等入手，或者从需求端旺季阶段性补库等入手，或者仅

It is only because the absolute price of the stage commodity futures is too low, especially when the futures are heavily priced, but it is different from stocks. If the futures price is pushed up or pushed down, the speculation factor will dissipate, which is different from the stock market. After all, the commodity futures will be restrained and the supply and demand trend of the commodity, especially the warehouse receipt pressure. At present, commodity futures as a whole plate, many varieties have already reached the limit at the supply side, and the demand side is even more boring. In particular, the supply side uncertainty time window of Zheng cotton is closing down, so the demand side will be the main factor for the capital to decide the sale; and the consumption growth rate will continue to bottom out in 8-12 months.

Because the downward pressure on the economy is still very high, prices are also running low, and the overall consumption and export of cotton spinning and clothing are still in a low state.

In short, the short and medium term game around Zheng cotton is still going on. The potential supporting factors are likely to start in early 9, but the effective time is very short, and the intensity will not exceed expectations. In the short term, some game factors will be more realistic when the futures price is higher than the spot price, so it will be more realistic to do well in fund management.