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Cotton price downward "correction" domestic and international spreads will narrow

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Cotton price downward "correction" domestic and international spreads will narrow

[Abstract]:
Cottonstoragesystemwillcometoanend.In2014,thestatewilllaunchapilotprojecttosubsidizesoybeanpricesinnortheastandInnerMongoliaandcottoninXinjiang.ThetargetpricemaybeannouncedinlateAprilandearlyMay.Thepr
Cotton storage system will come to an end. In 2014, the state will launch a pilot project to subsidize soybean prices in northeast and Inner Mongolia and cotton in Xinjiang. The target price may be announced in late April and early May. The price subsidy will be implemented later this autumn. Immediately after the fiscal reform is implemented, the price of cotton and soybean will bring about market pricing. As a result, there is concern in the industry that increased supply and pressure from the policy side will keep both prices down.
Cotton spreads will narrow at home and abroad
With the current policy of cotton storage and reclamation, the target price guided by direct subsidies will be formed based on the mode of "cotton cost + basic income." This means that the government directly intervenes in cotton price control through administrative means and begins to go to the market Regulation. "Jinshi Futures cotton senior analyst Yu Lijuan told China Securities Journal in an interview that direct subsidies introduced, the domestic cotton price is expected to return to the market, and gradually with the international market, domestic and foreign cotton spreads will narrow, but If the price plummets, the projected area under cultivation in the cotton plantation in the Mainland, which has not yet been clearly protected at present, will be greatly reduced.
There are currently three main types of direct subsidies for cotton in the market: one is subsidy of about 200 yuan per mu for planting area; the other is subsidy of 0.5-0.8 yuan per kilogram of cotton subsidy; the other is storage and pilot subsidy Go hand in hand, to maximize the protection of farmers interests. Aksu delegation suggested that the average price of seed cotton after the price difference subsidy should be maintained at 9 yuan / kg (combed cotton price of 22.5 yuan / kg) is more reasonable.
"After the implementation of direct subsidies, the domestic cotton prices will inevitably move closer to the international cotton prices, the gradual implementation of the same price, direct subsidies are negative for Zheng Cotton." Cathay Pacific Great Wall Futures Investment Advisory Zhang Liang, deputy general manager, said.
It is reported that in 2011 the implementation of the cotton market in the country since the policy of purchasing and storing cotton, cotton storage and storage prices from 19,800 yuan / ton to 20,400 yuan / ton; but at the same time, the international cotton prices fell all the way to 15,000 yuan / ton. Analyst Xia Ting believes that the introduction of the direct subsidy policy will ease the long-term "upside down" price pressures in domestic and foreign cotton markets. Strict control over the issuance of additional quotas to realize market integration of cotton prices at home and abroad will ultimately lead to a consistent price trend between domestic cotton and imported cotton. This will not only help the cotton industry but also encourage cotton spinning enterprises to get out of the woods and at the same time be beneficial to market resources The rational allocation.
Yu Lijuan said: "China is a country that is dependent on cotton imports, but it is irrational to liberalize imports so far. In the latter part of the year, the issuance of possible quotas for slip allowances will be greatly reduced. Type quota issuance, or continue to throw a reserve with quota mode, the regression estimation of domestic and foreign cotton spreads is a slow process.
As of January 22, cotton stock reserves of 10.632 million tons. The industry believes that throwing cotton reserves in 2013/14 is still the main source of supply for China's cotton market, throwing storage prices or prices will be the center of the market. "High inventory, will continue to suppress China's cotton space upside.But taking into account the downstream textile industry consumption, under the suppression of high inventories down the cotton center of gravity, under the current pattern of consumption, it is not a Good thing is expected later with the improvement of consumption, China will steadily release the State Reserve inventory. "Yu Lijuan said.
In the view of Li Juan, the 2013/14 futures contract price is not expected to be affected by the direct subsidy policy. However, the price of the futures contract for 2014/15 will be directly affected by the direct subsidy policy and a discount on the 2013/14 contract. Late cotton prices fell under the control of high stocks fell hard and difficult, 2014/15 forecast operation of cotton prices will be down to 16000-18000 yuan / ton.