Do We Have A "Nervous" Cotton Market'S Scarce Futures Tool? Look At This Authoritative White Paper.

It was held in Qingdao on June 20th ~21. "2019 China International Cotton Conference" China Cotton Association and Zhengzhou Commodity Exchange jointly issued Cotton futures service white paper on high quality development of cotton industry (hereinafter referred to as the white paper).

The Zhengzhou Mercantile Exchange launched cotton futures in June 1, 2004. In June 1st this year, it was 15th anniversary of cotton futures listed. The release of the white paper. The purpose is to review the development process of cotton futures, to show the healthy development of futures market serving the cotton industry, and to forecast the development prospect of cotton futures.

The white paper is divided into two parts. The 7 part It includes "foreword", "born in the course of changes in the times," started by market reform, "steady growth and development, and strong market base." "," prominent functions, help industry development "," constantly improve themselves, enrich the tool system "," grasp the main line of reform, adhere to innovation and development "and" concluding remarks ".

Wang Jianhong, Secretary General of China Cotton Association "The China Cotton Association, as an industry organization representing the interests of all sides of the cotton industry chain, has been committed to promoting the development of the derivatives market service industry," the white paper said at the launch ceremony. To further enhance the effectiveness of the financial market in boosting the real economy, the China Cotton Association and the Zhengzhou businessmen jointly formulated the white paper and chose to release it at the China International Cotton Conference. We hope to push the Chinese cotton market further to maturity through various efforts and provide more choices for the risk management of enterprises. "

Systematically combing the development process of China's cotton market

In the white paper, we systematically reviewed the development of cotton market and cotton futures in China.

In the early twenty-first Century, the development of China's cotton market entered a new stage, and the cotton industry in China underwent profound changes.

First, the cotton industry began to market reform. 。 Cotton is an important strategic material in China. Since the founding of new China, the government has implemented unified purchase and marketing of cotton. Since the third Plenary Session of the 11th CPC Central Committee, the Chinese society has undergone a historic spanformation of reform and opening up, and the cotton market has been gradually liberalized. In 1998, the sale price of cotton was released; in 1999, the State Council decided to further reform the cotton circulation system, and the purchase price of cotton was mainly determined by the market. In 2001, the State Council further deepened the reform of the cotton circulation system, and put forward the general idea of "putting aside two points, strengthening three and taking the road of industrialized operation". The cotton circulation system reform was implemented on the ground, and by 2001, 30% of the private and other enterprises entered the circulation of cotton trade, which changed the format of the original exclusively owned by cotton and hemp system enterprises.

The two is the gradual establishment of market price mechanism. 。 The price fluctuation of cotton increased. During 1999~2001, the annual price fluctuation of cotton reached 29.4%, and the risk of cotton producers and managers increased.

Three, China's cotton price system is gradually improving. 。 There are two influential cotton prices in the international market. One is the spot price of Liverpool cotton (Cotlook A and B index), the other is the cotton futures price of New York Futures Exchange (NYBOT). The spot index reflects the spot cotton price, and the futures index reflects the change of forward supply and demand. The China Cotton Association released the Chinese cotton price index (CCIndex) in 2002, and the futures price system is in short supply. The cotton price system needs further enrichment. China's futures market has been cleared up and cotton futures have come into being.

In the 90s of last century, China's futures market just started, the market lacks centralized and unified regulatory bodies, the laws and regulations are imperfect, and the market development is more chaotic. 1993 ~2001 The State Council carried out the rectification and rectification of the futures market, reduced the futures exchange from 50 to 3, and improved the standardization of the futures market development. February 2004 The State Council promulgated the "opinions on promoting the reform, opening up and stable development of the capital market", and put forward the need to "steadily develop the futures market". "Under the premise of strict control of risks, a commodity futures variety providing price discovery and hedging function for commodity producers and consumers is gradually introduced". At this point, China's futures market ecosystem has been effectively improved, with the basic conditions for the introduction of new futures trading varieties.

Against this background, Zheng Shang's listing of cotton futures in June 1, 2004 has opened the curtain of rapid and coordinated development of the cotton spot market.

The value of cotton futures in the past 15 years has been described in the white paper. "In the past 15 years, cotton futures have been adhering to the path of boosting industrial reform, complying with the adjustment of the national industrial policies, actively seeking for new changes, adjusting the benchmark delivery point to Xinjiang, launching the pilot of" insurance + futures "to enhance the implementation effect of the national industrial regulation and control, and become the catalyst for industrial reform. Over the past 15 years, cotton futures have been adhering to the path of innovation and development, enriching the cotton derivatives system, and introducing cotton and futures futures, cotton options and other kinds of tools to build an integrated business platform to meet the needs of wind control and financing of real enterprises and become an accelerator for the development of cotton industry. "

Cotton futures help stabilize and develop industries

The white paper shows that cotton futures have made positive contributions to the stable and healthy development of cotton industry in the past 15 years.

First, the function of the futures market will continue to play. 。 Since 2004, average daily turnover and positions of cotton futures have reached 144 thousand hands and 153 thousand hands respectively, generating 3 million 850 thousand tons of warehouse receipts and 1 million 564 thousand tons of cotton deliveries. The current price correlation is over 0.95.

It is worth noting that Xinjiang is the main cotton producing area in China. At present, more than 90% of cotton processing enterprises in Xinjiang area are directly or indirectly integrated into the futures market, and large textile enterprises also carry out hedging business.

In the white paper, Cotton futures operation has strengthened Xinjiang's superiority as the main cotton producing area in China in the past 15 years, and enhanced the target price subsidy policy effect of China's cotton market. The focus of China's cotton market target price subsidy policy is in Xinjiang. Cotton futures have played an active role in consolidating the advantages of Xinjiang producing areas, which are embodied in the following aspects:

It is convenient for Xinjiang cotton processing enterprises to use futures hedging to stabilize cotton farmers' income, consolidate the status of Xinjiang's main cotton producing areas, set up premium for Xinjiang cotton, reflect high quality and high price, and sell cotton prices in the futures market. In line with the development trend of cotton industry, the Xinjiang cotton futures delivery warehouse was opened in Xinjiang in September 2017, adjusting the benchmark price area to Xinjiang, highlighting the benchmark role of Xinjiang cotton price, and pushing the cotton industry to speed up the spanfer to Xinjiang.

In the 2018/2019 cotton year, the total number of registered warehouse receipts in Xinjiang cotton reached 24053, equivalent to about 1 million 10 thousand tons of cotton, accounting for 95% of all registered warehouse receipts, and more and more Xinjiang cotton in the futures market to achieve value preservation and sales.

The two is to explore new ways of subsidy. 。 In the white paper, it is pointed out that since the beginning of 2016, Zhengshang has carried out a pilot project of "insurance + futures" for cotton. At present, 28 pilot projects have been built. The project covers the main cotton producing provinces in Xinjiang, Gansu, Shandong, Hunan, Hubei and Anhui, and convoys for 41 thousand and 200 tons of cotton planting. The total support is about 25 million yuan, with a total compensation of 20 million 708 thousand and 300 yuan, and the compensation rate exceeds 74%. From the pilot results, "insurance + futures" can solve the contradiction between "small production" and "big market" of cotton in a certain extent.

Wang Jianhong said: "in 2015, the China Cotton Association and Zhengzhou merchants, Futures Company and insurance companies worked out the first pilot scheme of cotton insurance + futures in the industry, which provided new ideas for exploring ways to change cotton subsidies. Since last year, the China Cotton Association has worked with Zheng merchants to hold two high-level training courses on cotton enterprises, which has been well received by the industry.

The three is to enrich trading tools. 。 Zheng Shang listed cotton yarn futures and cotton options, launched comprehensive business platform and warehouse receipts trading business, enriching the cotton derivative tool system.

As of June 1st this year, cotton yarn futures average daily turnover and positions reached 45 thousand hands and 18 thousand hands, initially achieved active; cotton options cumulative turnover of 1 million 97 thousand hands, the cumulative turnover of 3 billion 80 million yuan, average daily positions reached 52 thousand hands; cotton warehouse trading volume broke 67 thousand and 600 tons, turnover exceeded 1 billion 40 million yuan.

"The development of the cotton derivatives market has changed the traditional mode of trade. The use of futures market hedging and seeking more profit margins is also a common practice for most cotton trading enterprises. It can be said that the development of the derivatives market plays an important role in improving the scale and quality of the industry, enhancing the bargaining power and risk management level of the enterprises in the international market." Wang Jianhong said.

Zheng Shang will continue to enhance the function of cotton futures.

At the launching ceremony of the white paper, the responsible person of Zhengshang said that in the future, Cheng will continue to work hard as always, never forget its original intention, bear in mind its mission, and do the following work well.

First, continue to enhance the function of cotton futures and promote quality and efficiency of industry. 。

The white paper points out that at present, the multi-level risk management tool system in China's cotton market has been initially formed, and the function of futures market has become more prominent. Cotton yarn futures extension involves cotton futures chain. Cotton yarn is a downstream product of cotton and plays a connecting role in the cotton textile industry chain. Based on the successful experience of cotton futures, in 2017, the successful listing of cotton yarn futures by Zheng merchants, together with cotton futures and PTA futures, formed a series of textile fiber futures. Cotton textile enterprises can lock in processing costs through cross species operation between cotton and cotton futures, enhance their ability to resist risks, and stabilize production and operation.

Next, Zheng will continue to play the price discovery function in the futures market, reform the service target price, strengthen the exchange of silver futures, promote the warehouse receipt pledge financing business, expand the financing channels for the cotton related enterprises, continue to expand the pilot work of "insurance + futures", and explore the "order agriculture + insurance + Futures (right)" mode.

Two, we should expand opening up to the outside world and enhance international influence. 。 Next, Zheng Shang will continue to study the rules governing the internationalization of cotton futures, promote the introduction of cotton futures to foreign investors, and explore the import of cotton yarn delivery.

Three, we should continue to optimize the rules and regulations and consolidate the foundation of market development. 。

Next, Zheng will steadily increase the number of Xinjiang cotton futures delivery warehouse, continuously optimize the system of cotton futures and options rules, improve the function of the comprehensive platform, and create a multi-level system of cotton futures derivatives.

" The world is in a great change in the past hundred years. A series of reforms in China continue to advance. The dependence of cotton and textile industry on foreign trade is relatively high. Changes in the international trade order are likely to impact the entire industrial system. The factors that affect the price fluctuation of cotton and textile products will increase. The demand for risk control and control in futures market will be further enhanced, and the function of cotton futures will play a proper role. This is what the white paper says.