The Atmosphere Is &Nbsp; Cotton Continues To Be Weak.

　 After several rounds of callbacks, cotton futures prices have fallen by about 23%, basically unchanged from the lows after a sharp fall in November last year.

The current base tends to be reasonable.

along with Cotton futures The fall in prices and the cotton spot market were also on the decline since March. The 328 spot price of cotton fell from the highest 31228 yuan / ton in March to 24606 yuan / ton, or 21%. At present, the spot price of cotton has fallen below the futures price, and the basis is gradually reasonable. Since mid May, cotton futures have basically remained in the range of 24000 - 25500 yuan / ton interval, and the downward trend of spot market prices has also slowed down.

As the basis for regression is reasonable, we believe that cotton prices will stabilise temporarily in view of the tight fundamentals of global cotton in 2010/2011.

　　 Textile industry Weak demand remains

The continuous decline of cotton futures prices has made the market begin to question the "gap theory" in the cotton market. Moreover, cotton producers are reluctant to sell on the one hand when the cotton price is rising. On the other hand, the situation of resisting high price cotton has already appeared in the downstream. Textile enterprises have reduced the use of cotton by adjusting the ratio of raw materials and so on, and the stalemate in the spot market is serious, and the turnover is dismal. As the downfall intensified, market anxiety spread to the downstream cotton and grey fabric market. As of mid May, the price of KC32S was 33050 yuan / ton, a decrease of 6550 yuan / ton compared with the highest price in February, a decrease of 16.5%, and a JC40S price of 41130 yuan / ton, a decrease of 12% yuan compared with the highest price in February, 5670 yuan / ton.

The decline in prices has led to serious unsalable products in the textile industry, on the one hand cotton spinning The inventory of finished products is high. On the other hand, due to the sluggish sales, the difficulty of returning capital, and the tight money, enterprises begin to limit production and stop production.

While domestic demand is weak, the textile industry is also facing competition from foreign markets. Because of the rising cost of raw materials, manpower and electricity, the price advantage of domestic textiles has been weakened. Especially when the price of raw materials fluctuates violently, domestic textile enterprises are afraid to pick up large quantities of goods. Data show that Indonesia, Vietnam and other countries in Southeast Asia are showing a substantial increase in exports, reaching 25% and 30% respectively.

With the arrival of 6 and July, the textile industry will enter the traditional off-season, and the demand for downstream market is not expected to change much.

State policy puts pressure on the market

Although the country has repeatedly raised the deposit reserve and interest rates to curb liquidity during the year, the price of meat, vegetables and other foodstuffs has risen to a certain extent in May. As the drought continues, food prices will continue to rise, and CPI is expected to continue to expand. In the case of huge inflation pressure, we expect that there will be a round of policy to curb liquidity in the near future, and the market will be under pressure again.

In addition, the recent rumor of textile export tax rebates from 16% to 11% has been renewed. Although the relevant departments have not been confirmed, some analysts believe that the reduction of textile export tax rebates is in line with the trend of China's foreign trade development. If it is lowered, the time may be in June or July.

Once the tax rebate is cut down, many small and medium sized enterprises and large export enterprises will face huge risks, which will have a certain impact on cotton prices to a certain extent.

Overall, the cotton market is still lacking a clear direction. From the technical perspective, the current round of callbacks is basically over. Cotton prices are showing signs of rebound. But looking at the domestic macroeconomic environment and the cotton spot and textile market transactions, there are no new factors to support the price rebound.