From June 17th to 18th, the 2021 China International Cotton Conference, hosted by the China Cotton Association, the National Cotton Trading Market, and co-organized by the Zhengzhou Commodity Exchange, was held in Suzhou, Jiangsu Province. Guests from industry organizations, production companies, trading companies, textile companies, and financial institutions conducted in-depth discussions on the current domestic and foreign cotton market situations, futures service entity enterprise models and paths, and promoting the healthy and sustainable development of the cotton industry. Domestic and foreign companies Nearly 800 people attended the meeting.
The reporter learned at the meeting that with the economic recovery and consumption rebound at home and abroad, the prosperity of the cotton textile industry continues to rebound, reflecting the industry’s great resilience and endogenous power.
“Since August and September last year, the orders and production operations of cotton spinning enterprises have gradually improved, especially the profits have been significantly improved. From January to April, the overall situation of textile enterprises The situation of pure cotton yarn companies is relatively good, especially the optimistic situation of pure cotton yarn companies, which is the best stage in the past ten years. The good performance of pure cotton yarn this year, especially in the first half of the year, has brought huge improvements to our cotton spinning industry.” China Cotton Textile Industry Association Chief Engineer Ye Jianchun said at the meeting.
Chen Minghong, deputy general manager of China Textile Group Co., Ltd., said at the meeting that although the global epidemic is still ongoing and some countries and regions are becoming tense, the cotton spinning industry chain has basically recovered. Returning to the situation before the epidemic, domestic and foreign cotton prices have returned to the historical median level.
“It is worth noting that in recent years, the financial attributes of cotton have strengthened, and a price system that combines internal and external linkage and futures and cash has basically been formed.” All-China Supply and Marketing Cooperative Agricultural Materials and said Wang Jianhong, deputy director of the Cotton and Linen Bureau and vice president and secretary-general of the China Cotton Association.
According to Wang Jianhong, from a price point of view, the domestic cotton price trend is relatively stable, while the international cotton price fluctuates and rises. “Although my country’s economy continues to recover steadily and the supply and demand relationship is gradually improving, the epidemic is still spreading in other countries around the world. The international environment is complex and has strong uncertainty and instability. The foundation for domestic economic recovery is not particularly solid, and the structure Sexual conflicts still exist for a long time,” Wang Jianhong said.
Since April this year, the prices of some bulk commodities have increased significantly, which has attracted great attention from relevant national departments and has also introduced a series of regulatory measures. Among them, cotton prices also showed a slight upward trend due to factors such as tight global cotton supply and demand and continued recovery in domestic downstream demand. In this regard, He Xiyu, president of China Cotton Group Co., Ltd., said that the price increase of upstream raw materials in the cotton textile industry chain matches the price increase of downstream terminal consumer goods, and the price transmission mechanism of the entire industry chain is smooth.
In fact, the smooth price transmission mechanism of the cotton industry chain is closely related to the effective function of cotton futures. The reporter learned that since the implementation of the cotton target price reform in 2014, cotton futures have effectively played a price discovery function, with a correlation between futures and current prices of more than 0.9. They can respond accurately and quickly when market supply and demand imbalances and industrial policies change. Provide a strong basis for market entities to scientifically judge the cotton market situation. In addition, cotton futures prices accurately reflect changes in market supply and demand and have become the basis for spot trade pricing.
“Due to chaotic upstream prices from 2011 to 2014, costs could not be transmitted smoothly, and China’s textile scale had shrunk to a certain extent. Therefore, the sustainable development of the cotton spinning industry chain and the smooth price Transmission is closely related. Cotton futures make this price transmission mechanism smoother.” The relevant person in charge of Henan Tongzhou Cotton Industry Co., Ltd. said that with the implementation of basis trade, cotton purchases and sales in the industry depend on futures, and cotton yarn purchases and sales depend on futures. , futures prices have become the anchor for everyone’s transactions, with higher efficiency and smoother price transmission. At the same time, the cotton industry chain uses the price discovery function of futures to adjust production and demand in a timely manner, and the industry chain develops more healthily. For example, once the price of cotton yarn and cotton gives an objective processing profit, it means that cotton yarn production capacity must be increased to balance industry supply and demand. In addition, the futures hedging function provides companies with a platform to hedge risks, helping the cotton industry tide over difficulties and achieve sustainable development when there are major macroeconomic fluctuations.
From the “fixed price” in the past to the widespread point-price trading and basis trading now, entity enterprises are increasingly participating in futures, using futures tools to stabilize raw material costs and avoid market prices. fluctuations, thereby improving corporate operating efficiency. Cotton futures serve cotton entities better and more extensively, market pricing is more fair and effective, and profit distribution across the entire industry chain is more transparent and reasonable, which also promotes the healthy development of the cotton industry to a certain extent.
In addition, the futures market also plays an important role in helping companies operate steadily and expand their scale. He Xiyu said frankly that the annual trade volume of China Cotton Group has grown from 500,000 tons in the past to 750,000 tons today, and will continue to expand in the future. This is due to the fact that cotton futures and cotton options allow companies to avoid risks. “Because it has avoided risks, China National Cotton Group has now implemented the pooling of resources, using the platform for purchases and sales, and adopting a market-oriented approach to price pricing, so that textile companies can truly enjoy market dividends. At the same time, we also use basis trading Avoiding risks will allow enterprises to operate stably,” he said.
“Significant fluctuations in cotton prices in 2020 will lead to internal and external price differences.��Changes have an extremely obvious impact on textile companies. For textile companies, the biggest pressure comes from the fluctuation of cotton prices. Their real demand is for stability rather than decline. Especially after June, textile companies clearly felt that orders were showing a downward trend, and companies were very worried that cotton prices would fluctuate as a result. “Ye Jianchun said.
As a representative of cotton spinning manufacturing enterprises, Chen Xiachi, Vice President of Tianhong Textile Group Co., Ltd., introduced at the meeting the experience of enterprises using futures markets for risk management. “In recent years There are four ways Tianhong Textile uses financial instruments to manage risks and reduce costs in cotton procurement. The first is hedging, mainly internal and external joint hedging; the second is turning a fixed-price contract into an on-call contract; the third is hedging. It is the rational use of options tools. You can daily avoid risks by buying put out-of-the-money options. When there are forward orders, you can use structured option products to buy cotton at a lower price than futures. The fourth is to use futures to cross Contract arbitrage to reduce costs. “Chen Xiachi said that any strategy has advantages and disadvantages, and companies need to choose according to their own different situations and different market conditions.
It is understood that the current cotton textile industry chain There are still some imbalances in the participation of upstream, midstream and downstream enterprises in the futures market. The enthusiasm of downstream textile enterprises to participate in the futures market is obviously weaker than that of midstream and upstream raw material enterprises. In this regard, He Xiyu said that in the future, the Zhengzhou Commercial Exchange’s over-the-counter platform can be explored and used to update the futures market. Serving textile enterprises well.
“The pain point of traditional offline basis trade is that after the buyer and seller reach an agreement on the subject matter, delivery place, point price contract, and basis, they need to Fax confirmation increases negotiation costs. Not only that, paper contracts such as basis trade contracts, price point confirmations, and delivery confirmations generated during the transaction need to be mailed back and forth; during the price point process, the price point party informs the applicant through telephone, WeChat, QQ and other communication means. After the bidder requests it, the bidder manually places an order to close the position. The time cost of communication and order placement often causes the price pointer to miss the desired price. The price pointer makes multiple price calls in batches, which inadvertently increases the cost of the bidder. workload and labor costs, and information asymmetry may also cause disputes between buyers and sellers over the closing results. “The relevant person in charge of Zhengzhou Commodity Exchange said that the over-the-counter platform launched by Zhengzhou Commodity Exchange will effectively solve the above problems.
“First of all, both parties who use the over-the-counter platform sign online Basis trade contracts are time-saving, efficient, and legally guaranteed; secondly, when the buyer points the price, he only needs to enter the price, quantity and other requirements on the platform client. During the listing transaction, the platform freezes the margin, and the seller’s platform client will respond immediately; finally The platform forms the settlement price based on the transaction results fed back by the futures trading software, and the party being priced can independently set the on-site futures account and closing ratio. “The above-mentioned person in charge said that the off-site platform has the advantages of efficiency, accuracy, flexibility and convenience, and effectively realizes the linkage between on-site and off-site.</p