What Is The Impact Of Reserve Cotton Rotation On Ice Trend?

        On July 2, China reserve cotton Management Co., Ltd. and the national cotton trading market jointly issued the announcement on the rotation of central reserve cotton in 2021. From July 5 to September 30, 600000 tons of central reserve cotton were rotated. The "boot" of national cotton regulation and control was finally implemented. Some cotton related enterprises and speculators believed that the negative situation of domestic cotton futures market was about to be exhausted, Intermittent rebound signal appears.

 

      The only difference from the previous two years is that the fuse machine will be adjusted from a fixed price to a dynamic price in 2021. According to the announcement, when the cotton spot price index in the domestic market drops by more than 500 yuan / ton for three consecutive working days, trading will be suspended from the next working day; When the cotton spot price index in the domestic market does not fall for three consecutive working days, the trading will be restarted on the next working day. It is obvious that this year's circuit breaker mechanism has an obvious inhibitory effect on the unilateral sharp decline of cotton price, which is more flexible, more efficient and more targeted than in previous years, and the intention of supporting the bottom layer by layer is more obvious.

 

So what is the impact of reserve cotton rotation on ice and external market in 2021? The author's view is that the short-term is still difficult to get rid of the 85-90 cents / pound consolidation range.

 

First, in terms of quantity, the rotation of 600000 tons of central reserve cotton may further reduce the inventory of China and the world at the end of 2021 / 22, which is conducive to ice's backwardness of 85 cents / pound; Second, the cotton resources collected and stored from 2011 to 2013, and the impact of grade, quality, spinnability and other indicators on the import of medium and high-quality foreign cotton in 2020 / 21 and 2021 / 22 are weak; Third, the news of the cotton reserve ship in 2021 has been blatant since May. The bad news has been gradually diluted and digested. The bulls and funds are not confident enough to pull up or even close to the short end. The main contract of ice cotton futures does not have the momentum to quickly stand at 90 cents / pound and reach a new high; Fourth, a total of 600000 tons of reserve rotation is likely to mean that the release of the quota for cotton import with a sliding standard tax of 700000 tons will be delayed, and the expectation that the payment will be advanced to July may fall short, which will have a negative effect on the rebound of ice and foreign cotton spot.