New York cotton futures continue to show self-defense posture

This week, the New York cotton futures continue to show self-defense posture, in December contract lost 168 points to close at 41.30 cents, while the March contract lost 483 points to close at 41.86 cents.

AWP (adjusted world price of cotton) and cotton futures in New York between the negative feedback loop still exists, the week, AWP a further reduction of 265 points to 36.12 cents on the latest price fell to 34.56 cents. However, the December contract will be on November 21 to enter the first notice day, December contract in the face of the cash value of the real test, according to the scale of this project, when the three fell to 36.70 cents this week, the market price has obviously too low .

We have pointed out that the registration of the replacement cost of inventory is generally the sum of the AWP (cotton from the loan arrangements in the price of redemption) plus delivery fees, usually about 550 points to 600 points. This calculation does not even include the “net asset value” factor (cotton, power obtain loans to pay the price). As a result, in accordance with the current 36.12 cents AWP prices in December cotton futures contract’s lowest price of the transaction must be 41.50-42.00 cents, the delivery will only be meaningful.

The previous trading day, the December contract amount of disk space is still more than 36,000 hands, compared with the current registration of stock in hand, only 9769 (976,913 packets). In other words, if some insist on long delivery, may be short in embarrassment. Since they do not want to or can not afford to take in the face of a potential showdown, so short in December have no choice but to buy the position or positions after the move in order to escape hardship, we see that in December and in March Narrowing of the contract price, before closing today, the price is almost smooth, higher than the March contract at around 100.

However, the last few trading days, rebounded in December contract of just over 200 points in March contracts and other contracts but can not afford to hold onto their gains on the day, their heavy selling. Fewer and fewer export channels of trade, and cooperation in the cotton sector are asking, where is the buyer, at present, most of their traditional market conditions are very bad, no hope of improvement in the near future.

Last week, we put forward, the United States is entering a period of depression, we say a number of public opinion seems to trigger riots, more specifically, we are willing to talk about this issue. Textbook definition of recession is defined as real GDP for two consecutive quarters of negative growth, this has not happened, but at this time is actually an assumption. Constitute factors that depressed the absence of any precise definition, it is generally understood as the extension and depth of the economic downturn, more than the law of the business cycle, the annual GDP fell by more than 10%, the unemployment rate rose in a straight line, much higher than the general recession.

U.S. GDP so that the depth of the setback seems to be ridiculous, but when we use common sense to come to this conclusion, this is not over. More than 70% of the U.S. economy from consumer consumption. About two months ago due to the collapse of the economy, we have seen significant changes in consumer behavior. Consumers not only to reduce their spending, and now they are looking for cheap goods and services. For example, they do not buy luxury goods retailer, but Wal-Mart to purchase low-priced goods, they are no longer acceptable to 70 U.S. dollars a haircut, but the choice of 30 U.S. dollars, they are no longer high-end restaurants to eat , But set fire to their backyard barbecue pits. You understand it? We would like to say that the obvious economic austerity period in the form of consumer goods and services, changes that will lead to a change in accounting for GDP 70% of the sharp decline in consumer spending. These “value added” component being squeezed out of the economy, corporate profits will shrink considerably, business spending will also decline significantly, which is bound to lead to a rise in unemployment.

However, goods from the point of view, to reduce the degree of tightening may not indicate the amount of U.S. dollars as large. For example, if a person in the Wal-Mart to buy a pair of jeans, rather than in luxury retail, trading volume (GDP) may be reduced by 50%, but the deal still contains the equivalent of the goods. In other words, we must dollars of goods to be sold and amount of difference. At the same time, when the United States and Europe in some areas of consumer spending to reduce the most obvious, emerging markets are still relatively good. For example, this week, China reported that retail sales in October year-on-year growth of 22%, clothing sales grew 20% year-on-year. Some people may doubt the reliability of Chinese statistics, because we see the textile industry in trouble, but even if the data had been exaggerated, we still see a net growth of China.

Another longer-term support for the commodity prices of the factors (to emphasize here that the longer-term), is the world’s government and the central bank to the financial system has been injected in their financial markets to stop the break, they now resort to buying real estate economy. Deeper economic crisis, there is more government help to proceed in all areas of the economy. This will be on the road leading to high inflation, if there is no other way to virtual commodity price recovery, high inflation is only a matter of time.

A short period of time, as the dollar fell significantly, the price of cotton this year will not be stability soon, and we believe that the cotton market outlook is difficult to break through the current price levels. Only the strong export demand, while AWP prices, the cotton market continued to be the basis of strong, but at present, it appears to be impossible. December contract next week is the first notice day, the market is likely to continue down that once the December contract out of the market, we may easily see the March contract hit a low of challenges this week.