Rumour Has It That The Chinese Government Will Soon Acquire 500 Thousand Tons Of Xinjiang Cotton.

New York cotton: the weakness of the world economy will further weaken the level of consumption. Investors' worries are hard to dispel for a time. Index funds have been liquidated extensively and cotton futures have fallen to a 16 month low.

Except for some precious metals, other commodities are hard to escape at the moment.

One of the major commodity indices, the CRB index has lost 35% of its peak value in July 2008.

Since the rush in March this year, the speculative / hedging / index fund has nearly 3 million tons (or 13 million packs) of cotton on the ICE cotton exchange, and its net long position is about 1 million 800 thousand tons (or 8 million bales) of cotton.

Compared with the end of February 2008, the maximum net gross position decreased by about 60% (based on the total number of empty disks).

Outlook: the cotton futures market will continue to be subject to the liquidation of index funds (or other investors) in a short period of time. At the same time, the market's worries about demand and macro-economy are difficult to disperse in a short time.

Therefore, there is no doubt that the continuous liquidation of index funds may impact the market.

However, what needs to be considered is what potential impact it will have on the market once the number of long positions is substantially reduced.

At present, when prices start to go strong, there may be no resistance or even a massive vacuum of energy vacuum.

US Department of agriculture October 10, 2008 data

Cotton production and consumption in the United States: the rise in Chinese exports has led to a reduction in US exports, which is regarded as the worst prediction result.

USDA / world production and consumption: as expected, the pace of economic development has slowed down considerably, and US exports and world consumption have been affected, while domestic cotton production has increased, such as China and India.

USDA / major cotton producing countries: output and consumption of importing countries:

China: the Zhengzhou stock exchange is also under pressure. The cotton price is 12630 yuan / ton (the basic price of January 2009 contract), falling to a four year low.

The lowest point of the contract was 11850 yuan in 2004.

China's flower picking job has been completely rolled out, and cotton processing plants and cotton traders are hesitant about purchasing seed cotton.

Cotton growers say that cotton production costs increased by 30% over the previous year, so they are reluctant to sell seed cotton at current prices. They prefer to hold seed cotton and wait for better timing.

It is rumoured that the government may soon acquire 500 thousand tons of Xinjiang cotton to stabilize the market.