Adjusted world price (AWP) weeks to continue to price down

This week, the New York cotton futures market to continue to back, December cotton futures fell 211 points to close at 42.98 cents in March contract was down 249 points to close at 46.69 cents.

Adjusted world price (AWP) weeks to continue to price down, starting from tomorrow, it may be to cotton farmers in loans from the redemption of cotton, AWP price fell to 38.77 cents 1.35 cents last price reduction. And tomorrow on the AWP price may be reduced to about 37.0 / 37.50 cents, down market consolidation will continue. In addition, in accordance with experience, to register new stock price will be more or less AWP at the same time they will also be the cost of delivery (about 5-6 cents), as well as investors hope that the cotton loan reflected the “fair value” of factors. They are calculated from the current price of the December contract may be too low.

However, the market is a discounting machine, it tells us, “Never mind today’s computing,” in the next few weeks, prices will be cheaper. In view of the economic downturn in the world cotton situation and the serious problems facing the industry, all this may be true. As a result, many investors are willing to short the market continued to test the bet, and potential investors are still long in the choice, they expected to earn more profits. As long as this attitude prevails, the market would not have stalled the market prior to the change in wind direction, we could easily see another 5 cents or 10 cents turmoil.

However, a source of pressure on short changed. Over the past few months, we have a clear, high-pressure from hedge funds and index funds as well as the redemption of sales positions, traders reduced the net to do more. But when we examine the CFTC issued by the NYBOT and the latest speculation / hedging report, we note, CFTC 10 on report of 28 shows that index funds when the actual week of the 2461 increase in net long positions in hand, this is our first few months Index fund holdings to see a long, rather than liquidation.

Hedge funds over a period of time only liquidation, but according to report of the CFTC, speculators business of direct long positions in March, only 20,072 hand, dropped by nearly 100,00 hand. As a result, even if the hedge funds were forced to the final liquidation of a pack of them currently held by the cotton, and so far they have to sell the cotton, is a small fraction of the number.

NYBOT Friday’s report also tells us that the current bear market speculators are no longer the major driving force behind the market last week, speculative short covering 7340 contract in hand, and the 6991 trade holdings of short contracts in hand. These figures indicate that traders have to control the downward trend, they are worried that the depth of the economic damage to retrogression is big demand. Short hedge fund traders and short between the other obvious difference is that hedge funds were forced to basically short, the aim is to meet the margin, and traders are more short means. For example, traders observed a number of factors including AWP / cotton futures price in order to determine the time to sell if the price differences narrow, they may buy-back position.

However, as long as the economic situation is still in the doldrums, traders may continue to do so empty and short, and the scars of the index and hedge funds will not be quickly re-enter the large-scale commodity markets.

In addition, we believe that we are not facing an economic recession but the economic downturn. This is the difference between the two, the general recession is over the business cycle, the central bank to raise interest rates to cool the economy and then to pave the way for the next round of economic warming. This is what we are seeing now a different situation. The world’s central banks to cut interest rates are, rather than interest rates, injecting liquidity at the same time, and the economy is still no signs of recovery. This is the so-called economic downturn.

Are trying to market speculation that the economy is in the doldrums for much of the damage caused by demand, but can not find the answer. Investors fear that the situation is getting worse, unless the demand for more transparency, investors may be short first and then ask questions.

Next Monday, the U.S. Department of Agriculture will release its November report on supply and demand, the report will provide market information. The U.S. Department of Agriculture will not be as usual in the report to amend the basic data, the current economic situation forced the U.S. Department of Agriculture may not be realistic concern, and there will be significantly lower than the report of the World cotton consumption. The last report, the amount of textile mills in the world is still 1.2231 billion package, even if investors are more optimistic than that 1000-12000 million package. Even if the market does not believe that the United States Department of Agriculture estimated the current number of historical demand, as well as the stock soared at the end, all of the cotton market may be another major blow.

In addition, the U.S. Department of Agriculture report released Monday, exports may be disappointing. At present, exports to the United States estimated 13,000,000 for the package, although so far the number of commissioned 7,000,000 for the package, but we must remember that so far exported only 3,200,000 packets. Exports for the same period last year, the number of 3,600,000 packets, and the annual export quantity of 13,650,000 package. As a result, the U.S. Department of Agriculture data indicates that from now on the market to the end of the year, the export volume will be approximately the same as last year. We believe that the export volume 11,500,000 for the package, especially the United States, China’s largest customer will enter a dormant state.