The Cotton Market is Still Weak

    Since the start of cotton purchasing and storage in early September, in the 20 days by the end of the month, there are no purchasing and storage transactions. The first transaction appears until the finishing of National Day, and the trading volume of 90 tons was far from the purchasing and storage plan of 24,300 tons. In addition to complicated cotton picking and processing process, the shortage of cotton for purchasing and storage in the short term market, the drop of cotton prices, and the famers’ strong reluctant to sell emotion are all important factors.

    Since September, the European debt crisis continues to spread. The Greek crisis get temporary relief, but Spain, Italy suffered another sovereign credit rating downgrade, resulting in market concern intensified for a new round of financial crisis.

    From the domestic situation point of view, although the shortage of credit has caused a considerable part of the business operate difficultly, the domestic inflationary pressures are still too large. The CPI data of third quarter in this year will be released soon, and it becomes the market focus. The CPI index in September is widely expected to continue to maintain more than 6%, and the tightening policy is expected to be difficult to relax.

    Recently influenced by the volatile international economic situation, commodity prices dropped, and the international cotton prices further dropped. Import cotton prices fell with it, and its price advantage gradually appears compared to domestic cotton spot price, so import cotton purchasing volume increased. 

Influenced by this, the USA cotton exports improved obviously, since nearly a month the export signing rate is basically positive, sweeping the slump in the first half of the year.

    Except the growth of import cotton purchasing volume brings shock, the domestic consumption demand is in downturn continuously. The continuous rebound of cotton spot price didn’t improve the sales situation of cotton yarns, and the stabilized price also failed to strengthen market confidence. Under the unsettled cotton price, the textiles enterprises undertook huge risk and not dared to store cotton and accept big and long order. Influenced by the disinvestment of speculated capital and reversal of fundamental situation, the current cotton price tended to stability, but there is no substantial change in domestic consumption market. The order of textiles enterprises increased limited, the practical growth volume of textile exports in August and the slump of Pmi index all showed the slowdown of developing speed in textile industry. Most enterprises are still not optimistic to the future market, and the new cotton is coming soon, so the pressure exists in the supply aspect. The support of cotton fundamental plane is not strong enough, so it is to be observed whether the bad situation can be changed.    

    The “gold September” is not arriving as expectation, so the market expectation of “sliver October” also deceased. According to previous market situation, October is the period of new cotton coming and factories storing cotton, so the cotton price is used to reach a high point in the year, but under the situation of downstream consumption demand is unchanged, so the pull-up function of factories storing cotton is to be texted. 

    In the futures point of view, the trading volume and open interest of ZCE cotton main contract both decreased, and the capital continues to outflow, showing the market is weak.