Cotton Spot Market Weakness Did Not Change To &Nbsp; Zheng Cotton Volatility Increased.

This week (May 11-17), under the help of funds, Zheng cotton and electronic matching prices bottomed out, but textile sales remained low, and spot trading remained light. The pattern failed to support the electronic disk market, and the bottom area finishing platform remained to be strengthened.

When Zhou represents the 229 class cotton prices in the mainland

Figure 1 national cotton B index since the beginning of this year.

At present, there are many negative factors in the market, and the resistance of the cotton market is bigger.

First, the inflation situation in China is still grim, and the tightening policy continues to put pressure on cotton market.

In April, consumer price (CPI) rose 5.3%, clothing prices rose 1.4%, food prices rose 11.5%, industrial goods prices (PPI) rose 6.8%, clothing prices rose 4.5%, and food prices rose 8.4%.

The people's Bank of China announced on May 12th that the deposit reserve ratio of deposit financial institutions should be increased by 0.5 percentage points from May 18th.

This is the fifth increase in the central bank in the year.

Second, domestic cotton supply is more optimistic than expected.

As can be seen from Figure 2, despite the fact that this year's cotton futures warehouse receipts and effective forecasts are at the lowest level in history, as of May 17th, the number of warehouse receipts has been showing an increasing trend, up 8.3% from the previous month. Under tight supply this year, it is not easy for Zheng cotton warehouse receipts to grow in the middle and later stages of the year, indicating that the supply of cotton on the market is not as pessimistic as expected.

According to the national cotton market monitoring system data, up to now, Shandong, Hebei and Henan still have about 10% of the seed cotton not sold, and will also form effective supply in the later stage.

Fig. 2 change of standard warehouse receipt and effective forecast in recent years

Third, rumors of rumours of textile export tax rebates are rampant.

Recently, the market rumors that the relevant departments of the state have passed the decision to reduce the textile export tax rebate from 16% to 11%, and is expected to be formally launched in 6-7.

In the context of the continued appreciation of the renminbi, the textile export rebate rate will inevitably bring greater pressure to textile export enterprises, which will add to the current downturn in the textile sales situation.

Fourth, cotton production declined, cotton demand was lower or lower than expected.

According to the statistics of National Bureau of statistics, in April 2011, the output of cotton cloth in China was 2 billion 880 million meters, 170 million meters lower than the ring, and 5.57%, a decrease of 210 million meters and a decrease of 6.8%.

Cotton output has negative growth, which further reflects the slowdown in domestic cotton demand.

To sum up, both domestic and foreign textile market are facing greater pressure in the near future. The tightening policy attitude is also unfavorable to cotton price trend, the spot market is hard to change, cotton prices are running high pressure, short term or will continue to decline; after the rapid decline of the cotton futures market, the market divergence has begun to increase, the speculation atmosphere is stronger, the price is difficult to rebound substantially, but the fluctuation will be aggravated, or the fluctuation will increase.