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Three Factors Gather: Cotton Prices At Home And Abroad Or New High

2010/9/17 17:30:00 38


Supported by a new round of technical funds, New York


Futures this week continued to refresh a 15 year high.

The weakening of the US dollar has contributed to the rise of international commodity futures prices, and cotton has become a leading breed.

On the Asian subcontinent, India textile factory once again appealed to the government to restrict the export of raw cotton. The recent continuous rain weather may lead to a delay in the listing of new cotton, resulting in short supply of resources.

If India cotton production fails to meet market expectations, it is believed that the government will first use cotton in the country's textile mill as the first step, thereby implementing the policy of surplus cotton for export.

At present, there is no sign of weakness in New York's cotton futures market. Technical indicators indicate that cotton prices will rise and even reach 97 cents.

From technical graphics, the resistance of December contracts below 100 cents is not obvious.

Three factors driving

American cotton

Continuous rise


Chinese demand

Look, the US dollar and New York's cotton futures are breaking 90 cents.

In the short term, there is no possibility of a big pullback in the market.

First of all, the low temperature and rainy weather in the main cotton producing areas in China will affect the cotton yield and quality. The market generally believes that the demand for cotton imports will increase in the coming months.

At present, the US Department of agriculture predicts that China's cotton imports will reach 2 million 720 thousand tons in 2010/11, the second highest in history.

By the end of October, China's new cotton has not been listed on the stock market at the end of the year, and the domestic supply of cotton will be a problem. This time window will create conditions for the rise of cotton prices.

Second, the fall in the US dollar also stimulated cotton prices to increase, and this year's outlook for us cotton exports continued to look good.

Recently, the US dollar fell to a 15 year low against the yen and the US cotton export volume reached the highest level in the same period.

USDA expects us cotton exports to be 3 million 266 thousand tonnes this year.

Judging from the current situation, this forecast is also possible to further increase.

Thirdly, although the fundamentals of cotton in the United States have significantly tightened up in the past year and a half, the future may be even tighter.

The US Department of agriculture is expected to continue to increase US consumption and exports in the forecast for September. The end inventory will also continue to decline, and the inventory consumption ratio will drop to a 15 year low.

Finally, the net bull interest rate of ICE futures continued to increase, and the unpriced sales contract reached an all-time high level, which provided an opportunity for cotton prices to rise.

Although technical indicators show that ICE futures market has overbought, the above positive factors will prevent a sharp callback of cotton prices.

Strong demand in emerging markets

Emerging economies such as China and India have entered the middle and late stages of industrialization. Agricultural development has shown profound changes: first, the price of agricultural labor has risen significantly; two, land prices have risen significantly; three, the living standard of residents has been increasing after the acceleration of urbanization.

The acceleration of cost increase and the rigid demand growth will drive the [18.74 -2.34%] price of agricultural products to increase rapidly, and its comprehensive speed will increase from 5% in the past 10 years to about 10%.

After China, India and Pakistan are the second and third largest cotton consuming countries in the world, as well as second and third major cotton textile producers.

Textile output accounts for 14% of India's total industrial output, and textile exports account for 30% of India's total exports.

The textile industry is the pillar industry and the largest export industry in Pakistan. The number of employees is 19 million, accounting for 38% of the total number of manufacturing jobs. The output value accounts for 46% of the output value of the manufacturing industry, and the contribution rate to GDP is 8.5%. Textile exports account for 50% of the total export trade, reaching 67% at the highest.

Pakistan's exports of cotton yarn and cotton cloth rank the highest in the world, and its share in the international market is 30% and 8% respectively.

In 2009 and 2010, the policies of India and Pakistan to revitalize the downstream textile industry were frequent, so there was great potential for cotton consumption growth in the two countries in 2010/11.

There is one particular concern.

While developing the downstream textile industry, the two countries also introduced policies to restrict the export of cotton and cotton yarn, so as to ensure the demand for cotton and cotton yarns in the downstream textile industry.

The cotton yarn produced in India and Pakistan is cheap and inexpensive, and is very popular in the international market.

The two countries have restricted the export of cotton and cotton yarns, which will inevitably lead to tight supply of cotton and cotton yarn in the international market, and prices will rise.

In addition, according to foreign reports, the Pakistan Textile Mills Association said that the flood led to nearly 380 thousand tons of cotton production in Pakistan.

It is estimated that the country needs at least 680 thousand tons of cotton in 2010/11 to meet the demand for textile cotton.

At present, Pakistan official has cut the forecast of cotton production in 2010/11 to 1 million 970 thousand tons (the previous forecast is 2 million 380 thousand tons).

If Pakistan's cotton production is substantially reduced, the tight supply of the international cotton market will further intensify, which is likely to trigger a sharp rise in international cotton prices.

Historically, the December contracts in 1995 and 2003 lingered for 95 cents and 85 cents respectively. This does not mean that the bull market of ICE futures is coming to an end, but cotton prices may gradually pition to a consolidation period, and the rally will not be regained in the two or three quarter of next year.

Nor can the expectations be too high, because the fundamentals of the cotton market remain strong.

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