Early Commentary on Cotton: Difficulties in the difficult market for downstream textile operations remain weak

First, electronic coupling:

On June 6th, the combined market opened lower in the morning and continued its narrow downtrend. It ended the day down. In the national cotton trade market, the transaction volume of commodity cotton blending transactions was 14,840 tons, a decrease of 320 tons from the previous day, an increase in order quantity of 2,260 tons, and a cumulative order quantity of 139,660 tons.

Second, the ** market 1. ICE: Cotton futures prices rose on Wednesday, recording the largest one-day percentage increase since April 2011. The dollar was weaker and other commodities and global stock markets were higher as investors covered short positions. The benchmark December contract settled 3 cents higher at 68.36 cents per pound.

2. Zhengzhou: The main contract of Zhengmian cotton opened lower, boosted by buying bulls in early trading, changing hands at high intraday volatility, and then under the long and short selling pressures in the afternoon to suppress the next drop. The daily line formed a low open Yangxing star, and the recent contract transactions. The volume has not changed much, and the positions have decreased by far. On the contract day of CF1209, 89,034 contracts were traded, with 4,602 hands to lighten up, and 201,810 hand positions in the end; CF1301 had 257,794 contracts on the contract day, 10,906 hands in the daily increase, and 257,794 hands in the final position.

Third, the spot market:

Wei Qiao offer: Three levels: 18500 (temporary stop)

CC INDEX328: 18,545 yuan / ton, down 53 yuan.

Others: The average price of 527 cotton to the factory was RMB 16,267/ton, down by 22 yuan. At present, the pressure of domestic sales of downstream gauze is still difficult to ease, and the export situation is also worse than before. Some textile mills are under great financial pressure and have difficulty operating and the operating rate is not high. Some small-scale textile enterprises have reduced the amount of orders to make up for the lack of altogether shut-down, resulting in a situation where real estate cotton is almost unsustainable. The electronic market rebounded in early trading, but the overall weakness of the broader market remained unchanged. After midday, the price began to fall. It is understood that as of the end of May, there are buds in parts of southern Xinjiang, and the Yellow River Basin has a good seedling condition. In some parts of the Yangtze River Valley, the occurrence of plant diseases and insect pests is affected by weather conditions.

Fourth, the macro environment: As of June 5, ICE cotton stocks were 132,630 bales. Informa expects global cotton production in 2012/13 to be reduced to 120.2 billion bales. U.S. stocks rose sharply as expectations from the European Central Bank and the Federal Reserve raised expectations.

V. Operational recommendations: The main contract of Zhengmian Cotton Co., Ltd. was opened and the price of the contract was lower, and the recent contract period price was a new low. The trend continued the bearish pattern; the hour pattern opened lower and rebounded but was blocked by the previous day's rebound high. In the afternoon, the plate dropped, and the forward contract went down. On Monday, the price of stop-and-drop stopped falling and rebounded. The formation of a weak market consolidation in the short-term, the focus of trading in the past two days was moved downwards to the first-line low, and the increase in the daily forward contract high position Masukura, the possibility of consolidation is still relatively large. Operational advice: wait and see.

Sixth, the trend test: 1301 rose (neutral), wait and see arbitrage operation: sell September to buy January. Hold to 10%; sell 1 month to buy in May, hold 15%.