Experts: Cotton Prices Are Expected To "Fever"

Driven by a 140 year high in the international market period, China is at home.

We believe that due to the country's interest rate hike, the increase in the planting area and the spot price difference between China and the United States, the market for cotton fever is expected to subside and the market will shift to a strong oscillation of 30000 to 34000 yuan / ton.

The central bank raised interest rates again to stabilize inflation pressure.

The central bank announced in February 8th that it raised the interest rate of Renminbi deposits and loans from financial institutions in February 9th. At this point, the one-year deposit interest rate was raised to 3%, and the one-year loan interest rate was as high as 6.06%.

We believe that this interest rate adjustment is not only the embodiment of the stable monetary policy of the country in 2011, but also the comprehensive regulation of CPI in January, which is expected to be high, the credit growth is too fast in January, and imported inflation.

As a result of the impact of the international market, cotton futures are the key control varieties since November last year, and the price has been more than 25% callbacks. Although the impact of this regulation may not be as strong as the last one, it is enough to combat the accumulation and enlargement of the bubble in the cotton futures market, because we see that the cotton futures are at a high level and the increase in positions is limited. This indicates that there is no substantial growth in the real commercial buying in the market.

New year of China and the United States

In the recently released US cotton planting intention survey, the National Cotton Association of the United States said that the US cotton planting area in 2011 will reach 12 million 500 thousand acres, an increase of 14% over the previous year, but the market is expected to increase its planting area even more, because cotton futures have been rising this month, and the high price will stimulate the enthusiasm of cotton growers.

The China Cotton Association's recent planting intentions survey shows that the cotton planting area is expected to increase by 9.8% this year, affected by the spot price rise of cotton.

Although the planting area of China and the United States is expected to increase, it can not be changed in the short term.

Spot price rises are small, and market purchase intention is not strong.

In the process of futures prices rising from 29000 yuan / ton to 34000 yuan / ton, cotton spot prices rose slightly, and the overall rise was less than 1000 yuan / ton.

With the end of the textile business before the Spring Festival, the market procurement is relatively cautious. Especially after the interest rate hike, enterprise funds are relatively tight, and the desire to purchase hoarding is not strong.

Therefore, the futures price of 33000 yuan / ton is higher than the price of 28300 yuan / ton spot price. The deviation of the spot price will lead to the intervention of the current arbitrage fund and gradually reduce the excessive price difference.

Despite the above disadvantages, we consider that there is still a gap in the supply and demand of cotton market in the global 2011/2012 year, especially the shortage of high-grade cotton in China, the Limited registered warehouse receipts for cotton futures, and the promotion of global agricultural products by extreme weather.

We believe that the CF1109 contract will have a strong oscillation between 30000 and 34000 yuan / ton. We suggest that we should leave the market at a single high level and properly grasp the short-term arbitrage opportunities.