The Research On The Risk Management Through Futures Market — For The Practice Of Xinsai Co.,Ltd

Compared with other agricultural commodities, cotton is not only an important agricultural crops which in relation to the majority of farmers income, but also an important industrial raw materials, which is in relation to the textile industry accounted for 11% of the GDP. There is a competitive alternative relationship between domestic cottonand imported cotton, and it lead to high correlation between domestic cotton and imported cotton. Finally, domestic supply and demand, as well as global supply and demand, is reflected in the price.Cotton is the first big industry, in Xinjiang. Xinjiang cotton output has occupied half of the productive of National, and also the most part of farmer’s income in Xinjiang. The revenue from cotton is accounted for almost 35% of the farmer’s income. In some area such as Southern Xinjiang, the revenue from cotton makes for 70% of the farmer’s income. Xinjiang hasthe most of the comparative advantages of cotton producing, and the cotton industry in Xinjiang is import for the national economy. Xinjiang cotton related enterprises reduce business risk through participation in cotton futures market trading. Hedging the risk in the futures market leads the enterprises to smooth the productive, and make the positive role ofserving the overall situation of the national economy. The cotton industry in China is very important for the National economy, and has much influence in the international market. Theresearch on the price of cotton makes sense. The research is benefit for the farmers, and the enterprises in the cotton industry.This paper integrates the theory with practice. The enterprise strategic management theory is a foundation, assist in cost management, financial management, accounting, financial management, operations research, statistics and other disciplines theory tools. Theresearch method in the paper is both qualitative analysis and quantitative analysis. The researcher collects the basic data needed, analysts the domestic and international cotton industry, and the domestic futures market. This paper gives a practice, which is how the enterprise named Xinsai Corporation hedging the risk in the cotton futures. The paper also describes the impact of cotton related enterprises to participate in the risk management of cotton futures market, in the current development trend.Return always associated with risk. So is the cotton related enterprises to hedge the risk in the cotton futures. The futures market can provide a price risk management way for enterprises.The enterprises can manage the risk throng hedging in the future markets to reach the goal of robust operation. Domestic researches in the area of how to hedge the price risk for cotton related enterprises are still relatively scarce. This paper tries to explore the way of how to make better use of domestic cotton futures market to avoid the huge volatility of cotton price, for the Xinjiang cotton related enterprises. This paper’s research is founded of the angle of risk management. The research findings on the paper may make cotton related enterprises operate better and longer. Today, managers of enterprises should have the sense of crisis prevention. Cotton related enterprises should have the ability to adapt to the market, transfer the operation risk, and finally be bigger and stronger.