资讯 1 10 英文网 307 Feature 548780 We have seen a continuous decline in prices of cotton and yarn over the last 6 months 2015-05-13 15:51:25 yangfang
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We have seen a continuous decline in prices of cotton and yarn over the last 6 months
2014-10-08

J. P. Jain

Vice President (Marketing), TT Limited, India

 

Chinese holidays and Eid holidays have just ended – most people are now back to their desks. 


We have seen a continuous decline in prices of cotton and yarn over the last 6 months – yarn has declined more in expectation of cotton prices coming down with the new season starting. Hence spinning mills had to suffer huge losses due to the bearish mood of the buyers across the world.

The bearish sentiment of cotton, lead yarn buyers to eat into their stocks and just buy hand to mouth. Hence actual purchase of yarn was lower than consumption. All buyers are waiting for base cotton and yarn prices to start regular purchases.

We are now close to the bottom, with USA prices near the Loan Program levels – Indian prices near to the Minimum Support Prices of the Government and the Chinese Future Prices also reaching 13000 yarn/ton. Now the question is: 

“ WHAT IS THE LOWEST LEVEL AT WHICH ONE SHOULD ENTER AND BUY – THIS IS DIRECTLY RELATED TO COTTON PRICES BOTTOM PRICES “

Normally such questions are difficult to answer, however due to the Governments at the other end waiting to provide support – we feel its not a difficult one to get the range right. Cotton prices are now somewhere in the range, however not at the bottom of the range. Expectations are that we shall see the bottom of cotton prices in November. History has shown that turns happen before expectations and most miss the bus – hence very careful monitoring is required to ensure that yarn can be picked up at the lowest.

In today’s world the complexities of the market are so baffling and sensitivity to news flow is very high, that its very difficult to take any long term view. The basis of such views is shifting as fast as sand. Hence we are just endeavoring to analyze things as they stand today and present them in a defined manner. Based on current circumstances, we would like to present the current factors to enable you to take a informed buying decision:

  • Pipeline inventory is at the lowest possible level. In a recent study by leading Chinese consultant, they stated that imported cotton stock is at just 20% levels of what it was last year in the same period. Its a well known fact that low inventory levels are the biggest reason for spurt in prices.
  • Holiday season is over and we have a long working period till Christmas/Chinese New year – hence activity would be at its prime for next 3 months.
  • New York Futures have come down considerably from a peak of 95 cents to about 62 cents in a matter of a few months. Range spoken about is 58 to 68 cents for the next few months – technical rebounds after such sharp falls isnt uncommon
  • India domestic market is picking up from an all time low level, domestic demand is expected to grow by 8 to 10% which last year was just 3 – 4%
  • Pakistan import surplus has reduced due to energy crisis and improved domestic demand of yarn for more production of value added exports
  • China’s expected fall in cotton reserve price has already been built in
  • Global growth rates are as per expectations, there has been no change as such which could lead to a downward adjustment in consumption. Even retail sales figure etc don’t show any reduction in garment buying across the globe.
  • Spinners are losing money today, hence under immense pressure to increase prices at the slightest opportunity
  • Typically yarn prices are upward from November to February due to good demand.
  • Cotton prices are close to Government support levels in most countries
  • Chinese Government is pushing mills to use the current Chinese crop by restricting import quotas and holding reserve cotton sales (this would keep up local Chinese cotton prices).
  • TCP Pakistan has also announced that it would be buying cotton to support prices and help farmers.
  • Dollar index is running high which is keeping cotton prices under pressure, however a technical reversal is possible (Euro has fallen by almost 8% in short period).