How Will The Textile Enterprises Take Up The 7 Exchange Rate?

In 2019, the cotton year (cotton year) came to an end in August. New cotton will be on the market soon, but there are still many cotton in the southern part of the country that have not yet been sold, nor have they made any hedging in the futures market. Now, both the upstream cotton industry and the downstream cotton spinning industry show an obvious "bear market characteristics". Cotton is hard to sell at present, and cotton yarn is hard to sell. Market confidence has been severely hit by high cotton business inventories and sluggish downstream orders. Since bear market is obvious, let's see who can stick to the end. In the near future, the price of cotton futures contract CF1909 is approaching 12000 yuan, and the upstream lint suppliers certainly want cotton prices to rise. But the psychological purchasing psychology of the downstream cotton mills is about 12000. The store bully, the guest big bully the store, the end is to see whose bargaining power is more strengthening. As the saying goes, "bull market is daring, and bear market is long." The six elements of trade are "capital market price, delivery quality and quality".

What kind of money people earn, what kind of food they eat, and how the universe arranges itself. Recall that in the second half of 2010, global cotton prices skyrocketed, and some cotton farmers earned five years of money a year. Cotton stocks in some cotton mills were increasing every day, and even without spinning directly selling cotton stocks, they could earn a lot of money. But over the past few years, the enterprises that sold the stock of cotton resources at present have been operating difficulties or even gone bankrupt. Instead, they have been recognized by the customers who insist on not selling raw cotton, insisting on starting to support their employees, and adhering to the "in time delivery" according to the contract.

In those days, when cotton prices were 31000, cotton mills could still earn money, but now the price of cotton was 13000, but cotton mills lost money. Why? This is due to the "expected difference" in the lower reaches. When cotton is 31000, the market is expected to reach 40000+, while the cotton market in the spot market is 13000, but the market expectation is very low.

At present, the price of futures CF1909 cotton is approaching 12500-12000, and the psychology of downstream buyers is expected to be 12000 or even lower. Therefore, the future market confidence or market expectation is very important. According to our understanding, downstream cotton mills purchase raw cotton, the "base" level of spot price mode is at the base of CY1909 contract +600 to 800 points (you can understand that the concept of service fees plus capital and interest). The period cotton 12000+800 is equal to 12800 yuan to factory price, or 14000+800 point is 14800, the quality is increased and the discount is added, and so on, and so on. Then, if we can calculate the theoretical value of cotton price from the price of cotton yarn futures, we may also find the opportunity of cross variety arbitrage.

The price fluctuation of raw materials will become larger and larger in the future. Cotton mills should face the profit and loss of stock value fluctuation of raw materials and finished products directly. Cotton mills will be more complex and require more risk control. Mature textile enterprises generally adopt the following "trick" to defuse market risks.

1) prepare raw materials according to the order status, and stock the raw materials as far as possible within 2 months. Do not exceed 4 months. Spinning enterprises focus on production and do not mix speculative speculation. Use VMI system (supplier inventory management system), "annual quantitative, monthly pricing" procurement mode or adopt "spot price trading" mode. Ensure double insurance for raw material purchase quantity and price.

2) purchasing high-quality resources in the process of raw material decline. When prices rise, they fall heavy. We should seize the hot spots of the non market, vigorously develop BCI and high-quality cotton (such as the high-quality cotton produced by some Corps in Xinjiang), extend the supply chain upward, extend the industrial chain downward, and establish strategic partnership with upstream and downstream enterprises. In this regard, the BCI model can be used for reference.

3) make use of the function of "price discovery and pre sale" in futures market, do raw material purchase and cotton yarn sales (32 yarn delivery rules and premium). Warehouse receipt resources can be used as an important source of raw material procurement. Zheng Shang has improved the delivery rules for cotton yarn futures, which will help the downstream enterprises to accept warehouse receipts.

4) cotton mills can adjust the yarn product structure in the bear market, avoid price competition of conventional varieties, and do a good job in developing "specialized spinning" market for targeted customers. Open up the profit margins of innovative products. In the context of the global cotton surplus and cotton substitute (polyester, viscose, regenerated fiber) at the same time, we should improve our internal strength and find new breakthroughs.

Let's talk about the issue of RMB exchange rate. In recent days, the offshore exchange rate of RMB has broken 7, which seems to be beneficial to the export trade of textiles. But to think about it, it seems that the export situation is not so optimistic.

First, currency devaluation, and some imported raw materials temporarily lose their price advantage, but the rigid demand in recent years has also created a group of loyal fans of imported cotton and imported yarn, which has a certain rigid demand. If the domestic yarn can not keep up, this market share will still be occupied by imported yarn.

Second, the depreciation of the currency caused the export market "exchange rate dividends" in the international textile market downturn, basically by the request of customers to lower prices quickly digested. The conflict between China and the United States has risen from the level of trade war to the level of financial warfare. The exchange rate of RMB continues to depreciate. The possibility of gradual depreciation of 7.0--7.2--7.5 is not.

Third, the massive use of cotton alternatives and various chemical fibers is also a great challenge. At present, the proportion of cotton in the whole fiber processing volume will be further reduced. The supply of raw materials is adequate and consumption is low. There is no shortage of cotton in the market, so cotton will not have the basis for a sharp rise in the short term. Therefore, under the current political and economic environment at home and abroad, cotton mills actively take the initiative to grasp the rhythm of the market and adjust the product mix.

Conclusion: Since China's textile industry has accumulated for decades and has enormous processing capacity and product R & D capability, no country or region in the world can replace China in a short period of time. Most of the high-end industries in the textile and dyeing industry will remain in China. Cotton and cotton yarn production and raw material market are still in China, and the basic consumption of cotton remains basically stable.