The price of flowers is approaching a 15-year peak, and clothing companies complain

release time:2010-10-14

At a time when the international grain price led by wheat is in the ascendant, the international cotton price is approaching the peak in 15 years.Affected by this, domestic cotton futures rose by 4.5% in August. In order to stabilize prices, since August 10, China Reserve Cotton Management Corporation (China Reserve Cotton) has publicly released 600,000 tons of national reserve cotton to the market.

As the world's largest textile producer, cotton, wheat and corn mainly rely on domestic production capacity for self-sufficiency. China's cotton imports have always been relatively large. In the case of soaring international cotton futures prices, the pressure on domestic cotton prices should not be underestimated, and this has been transmitted to downstream related industries. "PTA, a substitute for cotton, has been rising very well recently. Due to cost considerations, some garment manufacturers will reduce the amount of cotton and increase the use of polyester." Liu Qingli, an analyst at GF Futures, told the Nanfang Daily reporter.

Situation Analysis

"Weather trouble" international cotton prices approaching 15-year peak

Since August, the settlement price of CCF1101, the main cotton futures contract on the Zhengzhou Commodity Exchange, has risen by 4.5%. Analysts said that the strength of Zheng cotton prices was directly caused by the recent surge in international cotton futures prices.

The US Department of Agriculture announced on August 13th its monthly global agricultural production forecast report, which lowered the 2010/11 cotton ending inventory to 45.61 million bales from the previous month's estimate of 49.61 million bales (1 bag of about 480 pounds or 218 kilograms). In the past three months, the international cotton futures price has been rising steadily, and has gradually approached the highest level in 15 years.

"The tight supply and demand relationship in the global cotton market is the basis for determining the short-term bull market in cotton." Liu Qingli, an agricultural product analyst at GF Futures, pointed out.

The U.S. Department of Agriculture said cotton farmers around the world will harvest the lowest acreage in more than 20 years this year, and for the 15th year in a row, global cotton production growth has not kept pace with rising demand. According to its July forecast, the inventory-to-consumption ratio for the next year will be reduced to 41.7%, the lowest since 1994/1995, which will support cotton prices to maintain high prices.

Like wheat and other food crops, the tight supply and demand of cotton is also caused by "weather." In the past three months, several provinces in southern China have been hit by a catastrophic flood that has not been seen in a decade. According to incomplete statistics, as of July 30, floods in China had destroyed a total of 9.2 million hectares of crops. Some market reports predict that the floods will reduce China's cotton production by 5%-10%.

The floods in Pakistan were even more serious. The affected population was as high as 16 million, and 30% of the country's cotton fields were destroyed. This has led directly to the traditional cotton exporter Pakistan, in 2010 may even become a net importer of cotton.

Unlike wheat and corn, which mainly rely on domestic production capacity for self-sufficiency, China's cotton imports have always been relatively large. Therefore, in the case of soaring international cotton futures prices, China Reserve Cotton decided to auction 600,000 tons of national cotton reserves through the national cotton trading market from August 10 to stabilize domestic cotton prices.

Trend research

Cotton prices may fluctuate and rise, and 1/3 of domestic cotton demand needs to be imported

Judging from the current situation, "the room for cotton prices to fall is limited, and the market outlook should take into account weather factors and downstream demand," said Liu Qingli.

Although from a global perspective, the gap between cotton supply and demand has narrowed, and there is even a forecast of oversupply. However, the domestic supply and demand gap is still expanding slightly. According to USDA's July forecast, China's cotton production in the next year will be 7.185 million tons, and the consumption will remain at a high level of 10.669 million tons.

"From the perspective of demand, the global economy is now recovering, my country's textile exports are gradually recovering, and the demand for cotton is expected to continue to rise steadily." Liu Qingli believes.

Some analysts pointed out that there are still some uncertainties. Because the previous weather still had a great impact on cotton, the seedling situation this year was significantly worse than in previous years. In addition, Xinjiang, the main producing area, was affected by extreme weather at the early stage of planting, and some cotton fields were replanted. If the frost season arrives earlier, it will have an adverse impact on cotton quality and yield.

The shortfall of domestic cotton in the next year is mainly supplied by imports. Li Jiagui, an analyst at COFCO Futures, believes that at present, there are not many cotton reserves in the national reserve, and the possibility of re-sell next year is almost zero, and once the cotton price drops, the purchase and storage measures will be started immediately. Therefore, China's cotton gap in the next year will be largely made up by imported cotton, and 1/3 of the cotton demand needs to be made up by imports. In this way, the initiative of cotton price will be more in the hands of foreign businessmen, and the room for domestic regulation will be narrowed.

Li Jiagui also pointed out that even if the weather conditions are good in the later period and the cotton yield is high in the next year, the global cotton inventory-to-consumption ratio will still hover at a low level. In addition, my country's cotton gap remains at a high level, and domestic and foreign cotton can not rule out the situation of linkage rise.

Industry influence

Cotton prices rose 5%, clothing companies' profits fell 2%

Ling Fangcai, chairman of Guangdong Textile Import and Export Co., Ltd., said that the rise in cotton prices has had a great impact, which will directly affect our production costs, which in turn will lead to a decline in our profits and a decline in the competitiveness of our company.

The contract that has been signed can only be continued to be performed, but it is actually a loss, and the future quotation will be increased accordingly, otherwise it will not be able to cope with the pressure brought by the current increase in cotton prices.

However, rising cotton prices are a problem facing the world. It is expected that the price of cotton will rise to a certain extent next year. At present, the price of top cotton is close to 19,000 yuan per ton, and it may exceed 20,000 yuan next year.

Pan Rihui, secretary general of Dongguan Textile and Apparel Industry Association, reflected that, in fact, cotton prices have risen for nearly a year. Since cotton accounts for about 40% of the cost of general clothing, according to estimates, if the price of cotton rises by 5%, corporate profits will drop by 2%.

It is worth noting that at present, the profits of enterprises in my country's textile industry are very thin, even lower than 3%. Therefore, once the price of cotton rises sharply, enterprises can only choose to raise prices. However, in the context of the global economic downturn, consumersare already holding their wallets tightly, and it is difficult to raise prices.