Cotton price change opens the market innovation space price fluctuation will be the norm

"the core effect released by the pilot project of cotton target price reform is that the market mechanism gradually plays a decisive role in the formation of cotton prices." Zhang Fan, chairman of Zhengzhou Commodity Exchange, said at the 2014 Zhengzhou Agricultural products (Cotton) Futures Forum recently. He said: there have been many positive changes in the cotton futures market, such as the convergence of spot prices during the flowering period, and the price gap between China and the United States has obviously narrowed, from more than 6000 yuan per ton at its peak to about 2000 yuan at present.

"the futures market has the functions of price discovery and hedging, and plays an irreplaceable role in improving the price mechanism of agricultural products." Wang Xiaobing, deputy director of the Market and Economic Information Department of the Ministry of Agriculture, pointed out that the pilot project of cotton target price reform should not only enhance the competitiveness of the cotton industry through market-oriented reform, but also provide experience and reference for the price formation of other important agricultural products and the establishment of market regulation and control mechanisms.

Price fluctuations will be the norm

Since the beginning of this year, the downward trend in cotton prices has been very obvious. As of October 16, China's cotton price index fell to 14792 yuan / ton, down 13% from the end of August. In the same period, Zheng Mian's main contract was 13635 yuan / ton, down 4.3%. "without the support of temporary storage prices, domestic cotton prices will gradually return to the market under the target price." Wang Jianhong, deputy secretary general of the China Cotton Association, said that cotton demand is expected to show restorative growth, estimated at 8.5 million tons, but whether this amount can be achieved in the current market still needs to be considered.

Cheng Guoqiang, secretary general of the academic Committee of the Development Research Center of the State Council, pointed out that the current cotton market should adhere to the market pricing principle, improve the price formation mechanism, let the market determine prices, and minimize policy intervention as much as possible. prevent policy implementation from evolving from production support to income support, that is, from linked subsidies to decoupled subsidies. "to ensure the enthusiasm of the growers, it is necessary to implement who grows and replenishes whom, many kinds of supplements, and neither planting nor replenishing."

Representatives of cotton enterprises attending the meeting believed that the target price policy not only ensured the interests of cotton farmers, but also cotton spinning enterprises will bid farewell to the era of high-priced cotton. "the target price policy helps to straighten out the price relationship between cotton and textile, so that the competitiveness of textile mills can be restored and improved." Said Wang Wanxiang, general manager of China Cotton Group Co., Ltd.

Let the market determine the price, the fluctuation of cotton price this year will be a normal, it should be said that the operating risk of cotton spinning enterprises has also increased than before. "the increase in the risk of spot operation leaves a huge space for futures. Enterprises can use the futures market to find prices, avoid risks, spread risks, and lock in costs, and the spot market of agricultural products will be more closely integrated." Ren Xingzhou, director of the Market economy Research Institute of the Development Research Center of the State Council, said.

The future market innovation has a long way to go.

"only by improving China's futures market, will domestic cotton enterprises have a strong market awareness and speed up integration with international standards." Ma Wensheng, chairman of Xinhu Futures, believes that only when the futures market provides hedging protection can enterprises expand their scale, continue to explore industrialization and expand their own characteristic business model.

Yan Feng, general manager of Hubei Yinfeng Cotton Co., Ltd., believes that in recent years, the company has adopted two models to organically combine the futures market with the spot market: one is the "company + base + cooperative + cotton farmer" model, and the other is the "order + spot + futures" model. "the biggest highlights of the two models are: one is to radiate the periphery based on the base and connect thousands of cotton farmers through cooperatives; the second is to use the price of forward contracts to hedge, for example, when the purchase price of seed cotton is higher than the market price. Hedging can be carried out through the market to lock in risks."

The reform of the target price of agricultural products has broken the ice, and the innovation of the futures industry will catch up. Zhang Lei, general manager of Citic Futures, said that the cotton target price subsidy policy is equivalent to a pulse put option if viewed from the perspective of over-the-counter options. "the market has sold put options at subsidized prices to all large cotton growers, but whether this option can be obtained has something to do with the implementation of the government." He believes that the innovation of the futures industry should move from simply providing hedging tools to enterprises to providing more abundant risk management tools for industrial institutions and a variety of risk management products for enterprises.

"in addition to cotton and cotton yarn futures, cotton futures options should be introduced as soon as possible. Only with complete tools can market institutions choose risk management methods according to their own needs." Yao Guang, general manager of Galaxy Futures, said that the target price policy is the first step in innovation. In the future, cotton futures prices may be taken as the benchmark, planting, circulation and other factors will be taken into account, plus a certain degree of discount, and flexible prices will be used to optimize target prices, so as to further promote the market-oriented pricing mechanism.

Wang Xiaobing, Deputy Director of the Department of Market and Economic Information of the Ministry of Agriculture:

China's cotton seed subsidies and temporary collection and storage have effectively promoted cotton production and market stability. Under the guidance of the policy, the cotton area will be reduced to more than 63 million mu this year, with an output of about 6.5 million tons, which is probably less than that of last year, but the per unit yield and quality have been improved.

Liu Keman, Director of China Cotton Reserve Information Center:

Under the new policy thinking, the cotton reserve policy should also make corresponding changes from the regulation and control objectives, regulation and control mode, regulation and control mechanism, and when necessary, adjust supply and demand to make up for market failure, maintain industrial security, and the way of regulation and control is more market-oriented.

Wang Jianhong, Deputy Secretary-General of China Cotton Association:

The future development direction of China's cotton industry: in terms of the mode of production, improve the degree of scale and mechanization of cotton production, encourage the development of e-commerce and modern logistics, and reduce logistics costs. In terms of demand, it is necessary to maintain the domestic self-sufficiency rate at around 2pm.

Cheng Guoqiang, Secretary General of the academic Committee of the Development Research Center of the State Council:

The reform of the price formation mechanism of agricultural products will develop in three aspects: the first is to improve the minimum purchase price policy for wheat and rice, the second is to withdraw from temporary acquisition and storage at the right time, and the third is to speed up the establishment of risk management tools such as agricultural futures.