Analysis of the Effect of Storage Plans on Cotton Trend

Last week (April 29-May 5), the “2013 Preliminary Cotton Storage and Storage Plan” was introduced, and the temporary storage price remained unchanged at 20,400 yuan/ton, which was generally in line with market expectations.

In the second quarter, because the government already has more than 9 million tons of cotton, it will continue to dump stocks, and the inventory of cotton that has not been cleared by the port is nearly 500,000 tons, and the domestic cotton price may weaken steadily.

The cotton price difference between inside and outside has always been the focus of textile companies, and the domestic and international upside down of cotton prices is the “killer” of textile and garment companies’ profits.

The expansion of the cotton spreads both inside and outside the past week, on the whole, the general direction of the spread narrowing is still being maintained. Last week, due to the decline in the prices of cotton, the spread was higher than the lowest point is a temporary fluctuation.

The domestic cotton price is relatively stable, and the price difference between domestic and foreign countries is mainly outside cotton prices. In the first two years, global cotton production increased more, and at the same time, shrinking consumption led to an increase in inventories. Last year, the price of cotton went down sharply. Although the price of domestic cotton was also lowered, the decline was far less than that of foreign cotton due to the policy of stock collection and storage.

With cotton thrown into storage, the market circulation increases, domestic cotton prices have downward pressure, and the spread will be reduced in the short term. Some foreign institutions have forecasted that the 2013 cotton planting area is expected to decrease, global cotton production will fall by 7% year-on-year, and demand will increase by 2%. Outside cotton prices may continue to rise in the near future.

Because domestic companies have restrictions on quotas, they cannot import cotton without restrictions. The price of national cotton is higher than that of cotton. Therefore, the cost of cotton used by domestic companies is higher than that of competitors in Southeast Asia and other places, which has a certain impact on export competitiveness.

The main reason for the instability of the textile industry in recent years is that the price of raw materials fluctuates too much, and the export market still depends on foreign consumption.