The cry of "Wolf is coming" at 6 yuan per kilogram indicates that international cotton merchants have entered the Chinese cotton market, and the international integration of China's cotton industry has strengthened. What is the development trend of China's cotton industry? How will Chinese cotton merchants respond? The ensuing series of problems affect the main body of China's cotton industry chain.
In the past few years after joining the WTO, China's textile and garment industry has developed rapidly, and cotton consumption demand has expanded sharply. China's cotton supply has formed a three-legged situation of imported cotton, Xinjiang cotton, and mainland cotton. This has also made China's cotton industry fully integrated into the global cotton industry chain and trade map, and has become the most important market in the world. So what will be the development trend of China's cotton industry in the next three to five years? What is the current situation of Chinese and foreign cotton merchants?
Industrial development trend: A reshuffle is taking place...
A reshuffle is inevitable: From the current perspective, the future trend of China's cotton industry will be that the cotton processing and circulation industries will continue to reshuffle. brand, a few large cotton merchants control most of the market.
Currently, there are too many companies in China's cotton processing and circulation fields. They are generally small in scale, weak in risk resistance, and do not have sustainable business models. A large number of duplicative constructions have led to excess cotton processing capacity. The insufficient operating rate has also caused disorderly competition in the cotton purchase market.
Under the impact of the mature and advanced operating models of international cotton merchants, a large number of weak Chinese cotton processing enterprises will face elimination and integration. Individual cotton merchants who can survive will also rely on their successful experiences to quickly Be bigger and stronger. Finally, with the exception of Xinjiang cotton, the mainland cotton market is fragmented and will eventually turn into a situation where international cotton merchants and a few large domestic cotton merchants compete for hegemony.
International cotton merchant giants have very obvious advantages, and they conduct localized operations based on China's actual conditions, which is difficult for Chinese cotton merchants to compete with.
Five advantages of international cotton merchants:
1. Business scale and management advantages. Foreign businesses operate on a large scale but have few management personnel and low operating costs. International cotton merchants have hundreds of years of business exploration, accumulated a lot of experience, and have a reasonable and scientific corporate governance structure.
2. Talent advantage. In China, international cotton merchants hire a large number of local cotton management elites with high salaries to realize localized operations, while domestic cotton merchants are faced with the dilemma of losing outstanding management talents.
3. Strong financial strength. The operation volume of millions of tons requires huge funds, which is difficult for domestic enterprises to match.
4. Channel advantages. Before foreign businessmen entered the Chinese market, they were buying globally, selling globally, and allocating resources globally.
5. Use of hedging tools. This is the secret to the success of international cotton merchants in terms of survival, development, risk control and large-scale operations.
Three characteristics of Chinese cotton merchants:
1. The market is chaotic, competition is disorderly, and excess production capacity exists. Relevant data shows that although there are less than 9,000 qualified processing and purchasing companies in China, it is said that the number of unqualified cotton circulation companies in various places is much higher than this number. It is estimated that there are more than 18,000 companies, with a processing capacity of 30 million tons. In recent years, China's cotton output has only been 6-7 million tons, and the world's cotton output is only about 26 million tons.
2. Lack of funds, small scale, and poor risk resistance. At present, more than 60% of the purchasing funds of Chinese cotton enterprises are provided by the Agricultural Development Bank of China for cotton purchase and sales loans. Chinese cotton enterprises are generally small in scale and have extremely poor risk resistance.
3. There is obviously insufficient use of hedging tools. The vast majority of cotton-related companies have not yet used the futures market to avoid risks in spot operations, which is also an important reason why the companies are not doing well.
The growth rate of downstream demand is slowing down: Judging from the current development of my country's textile and garment industry, the development of the textile industry has taken a turn for the worse, the structure is constantly upgrading, and the growth rate of cotton consumption will slow down.
Currently, the development of China's textile industry has reached its peak, and profit margins are getting thinner and thinner, even reaching the edge of loss. The entire textile industry has entered a cold winter, and its development growth rate has begun to slow down. China's textile industry has accelerated reshuffle and integration, and the growth rate of cotton consumption will also decrease accordingly.
In recent years, China's social spinning volume has maintained a growth rate of more than 10%. In 2006, the social spinning volume was 17.22 million tons, a year-on-year increase of 21.9%.
According to the author's latest calculations, China's spinning volume will also reach 19.85 million tons in 2007, a year-on-year increase of 15.3%, and the growth rate has dropped by 6.6%. The decline in social spinning volume and cotton consumption will be the development trend in the next few years.
Coping strategy: Employ both talent and correct operating model
International cotton merchants have entered China and have coveted the Chinese market for so long. They know better how to display their ambitions in the Chinese market. If you are a member of China's cotton processing and trade industry, have you smelled the smell of blood wafting in the distance? Have you realized that the crisis lurking around us is about to become a reality?
The author believes that if we want to avoid the tragedy of the soybean industry from happening again in the cotton industry, we must study the business strategies and operating methods of international cotton merchants as well as possible changes in cotton prices, and take correct and effective measures. Let enterprises survive in this international competition.
Based on the operational strategies that international cotton merchants may adopt in the Chinese cotton market, the author believes that the response strategies that Chinese cotton companies can adopt include the following aspects:
1. Construct and utilize futures The risk-averse operating model of the market.
International cotton merchants attach great importance to using the cotton futures market as a risk-avoidance tool, which also provides a strong guarantee for their development and growth, and has formed a strict and almost rigid but effective operation mode of combining spot and futures. Chinese cotton companies must also build such a risk-averse operating model and expand their cotton business scale.
The futures market has the functions of price discovery and hedging. In the hundreds of years of international cotton futures and spot markets, international cotton merchants have used the futures market to avoid risks and combined futures and cash business strategies to make their companies bigger and stronger. These are successful cases. In 2004, China's cotton futures were listed for trading on the Zhengzhou Commodity Exchange, marking the improvement and maturity of the cotton market system, building a bridge between the spot market and the capital market, and providing large-scale operations for Chinese cotton-related enterprises through the combination of futures and cash markets and value preservation and hedging. Provides a platform and environment.
At present, there are still very few domestic cotton companies that make use of this platform on a large scale. International cotton merchants have boldly tested the Chinese cotton futures market, and learned from its operating model in the international market, which has been successfully replicated in China and achieved remarkable results. Therefore, as cotton-related enterprises become bigger and stronger, they will eventually learn to rely on and flexibly utilize the futures market. This is also a major trend in the development of Chinese cotton enterprises in the future.
Take Louis Dreyfus, the international grain and cotton trading giant, as an example of its domestic cotton futures operations in China in recent years. In 2005/2006, the first year Louis Dreyfus tested the waters in China, like most domestic cotton companies, it experienced the embarrassment of "buying high and selling low". The average purchase price of cotton is 14,500 yuan/ton, and the average selling price is 13,800 yuan/ton. However, relying on skilled and accurate hedging operations, Louis Dreyfus got rid of the loss-making situation of Chinese cotton companies and still made a profit. This year, their operating volume did not exceed 100,000 tons.
In 2006/2007, Louis Dreyfus also achieved brilliant results in its new cotton acquisition. According to the author's observation, Louis Dreyfus purchased a large amount of third-grade cotton at a price of about 12,700 yuan/ton, which is about 20,000 tons. At this time, the Zhengzhou futures price was on the high side, so they sold short on the futures market to lock in huge price difference profits. Since then, spot prices have been rising steadily, while futures prices have fallen sharply since February 2007 due to heavy selling pressure, until the basis difference between the two gradually narrowed. Louis Dreyfus not only made profits on spot prices, but also achieved great success on futures prices. The overall profits were very objective.
Zhengzhou Commodity Exchange registers about 150,000 tons of cotton warehouse receipts every year, creating a large number of stable futures and cash arbitrage opportunities for many cotton processing and circulation companies. At the same time, it also transfers a large amount of operating risks and price fluctuation risks to the spot market.
2. Expand the channels for cotton purchase loans and diversify the sources of cotton funds.
Cotton acquisition funds have always been a weakness of Chinese cotton companies. It is very dangerous for enterprises to operate solely on cotton loans from the Agricultural Development Bank. Because the Agricultural Development Bank of China's loan repayment around June every year will force cotton companies to sell inventory to repay the cotton loans from the Agricultural Development Bank of China, and it is very likely to be sold at a relatively low price in the year, the risks of cotton business operations will increase. Therefore, it is necessary to obtain more cotton loans through various financing channels, which will also replace some of the loans from the Agricultural Development Bank of China and diversify the sources of funds for cotton acquisition.
3. Increase the training and introduction of outstanding international cotton management talents.
Cotton management talents are the core issue of market competition. Without excellent cotton management talents, cotton companies cannot survive in the fierce competition. Due to high-paying poaching by international cotton merchants, Chinese cotton companies have begun to lose a large number of outstanding management talents with rich experience. Therefore, cotton enterprises must improve the salary and benefits of outstanding cotton management talents, and cultivate and reserve a large number of cotton management talents in a timely manner in order to maintain sustainable development.
4. Learn to use external cotton research forces and research results.
Research on cotton market trends is the soul of cotton enterprise development. Enterprises must not only train their own cotton market researchers, but also learn from external cotton research forces and research results for enterprise development. This is the so-called cotton purchase market consulting service, and we often carry out market research and timely adjust cotton management ideas and strategies.
5. In order to improve the ability to resist risks and core competitiveness, implement industrialized operations.
As cotton processing, circulation and even cotton consumption companies are facing huge competitive pressure, industry profit margins are getting thinner and thinner, and risks are getting bigger and bigger. In order to make the company bigger and stronger, it must To improve the profitability, competitiveness and risk resistance of enterprises, cotton industrialization management has become the first choice and the trend of future development.
Cotton industrialization management strategies are mainly divided into three types, namely extending from the upstream to the downstream of the industrial chain, extending from the middle to both ends, and extending from the downstream to the upstream.
The development and growth of Henan Tongzhou Cotton Industry is a typical case of cotton industrialization management that extends from upstream to downstream in "cotton processing-trade circulation-textile".
Shandong Ruyi Group and Black Peony (Group) Co., Ltd. are textile companies that in order to obtain stable raw material procurement channels and supply sources, from the downstream to the upstream of "clothing-textile-cotton trade-cotton processing" A typical case of extended cotton industrialization management ideas.
Of course, the future development trends of China's cotton industry are not limited to the above aspects. The author believes that with the development of my country's cotton industry, more industrial development trends will be formed.
In short, the state should provide more support and encouragement policies to the domestic cotton industry, research and establish a unified, accurate and authoritative cotton data statistical system, adopt scientific statistical methods and measures, and understand China's cotton Production and sales data. Only in this way can the state's decision-making level and regulatory effect on the cotton industry be improved. Otherwise, China's cotton industry regulation will still be unable to get rid of the data puzzle. The international market will continue to impact China's domestic cotton supply and demand market and affect price trends, and there will be no protection for the domestic cotton industry. rise.