Cotton Market: Core Consumption Will Be Locked In Asia

After the big fluctuations in cotton prices since the spring of last year, the industry is now facing the following

There are many conjectures in the trend.

And what will happen to the global cotton textile consumer market in the core market of Europe and the United States? In addition to the demand and supply relationship, what are the other factors that affect the trend of cotton prices? Recently, at the China Cotton Development Summit Forum held in Chengdu, Sichuan, Kevin Latner (Liang Kaihua), executive director of the CCI and overseas director of NCC of the US National Cotton Federation (CFA), set forth their views.

Global cotton production exceeds supply this year.

As cotton prices reached historic highs in the spring of 2011, cotton farmers' willingness to grow grew. In 2012, the planting area of the world's cotton increased by 2 million hectares, and the output increased by 1 million 400 thousand tons to 26 million 800 thousand tons.

The output of cotton in the United States is about 3 million 400 thousand tons, and Kevin expects us cotton exports to reach 2 million 500 thousand tons.

In 2012, cotton prices fell far more than grain prices, so it is estimated that the global cotton planting area will be reduced by 2 million 300 thousand hectares or 7% over the previous year.

Although the US cotton cultivation area is also expected to decrease, due to better weather conditions, Kevin expects us cotton production per unit area to increase, and cotton production is expected to reach 3 million 860 thousand tons, an increase of about 14% over the same period.

On the whole, global cotton production is expected to decrease by 1 million 400 thousand tons compared with the previous year, a decrease of 5%.

In terms of demand, the global textile industry still faces two major problems: uncertainty in the future economy and digestion of cotton inventory backlog at high prices.

According to the US Department of agriculture, the global demand for cotton is about 23 million 500 thousand tons this year. Compared with the world's 26 million 800 thousand tons, the gap between supply and demand of 3 million 400 thousand tons may lead to a substantial increase in global inventories this year.

Multiple factors affect cotton price trend

Looking back on the price trend of the recent 18 months, the peak value of import prices of cotton downstream products and the peak value of cotton prices generally have a lag period of 3 months, and the range is far below the fluctuation of cotton prices.

Sales of cotton products are inversely proportional to cotton prices.

Kevin believes that this is because when the price of cotton products rises, people's consumption will decrease.

It is worth noting that the rise of cotton prices has weakened the purchasing intention of consumers, and has also damaged the competitiveness of cotton products.

In 2011, imports of cotton clothing decreased by 13%, while the import of man-made fibres increased by 8%.

The price fluctuation has made cotton lose part of the market share.

Kevin points out that we need to judge the impact.

The price trend, the ratio between stock and usage is often important reference: when the ratio of inventory to usage is high, the market price is low; and when the ratio of inventory to usage is low, the price is high.

As economists have said, the solution to high prices is the high price itself, that is, when the imbalance between supply and demand, the market will play a role and bring them back to their original orbit.

The market in 2011 witnessed this theory. Cotton prices in this year have gone up too high, and the cotton mill's consumption has dropped by 4% this year.

Historical data also show that the cotton mill's largest consumption year is the year when the economic growth rate exceeds 5%.

And our forecast for next year's economic growth is 3%~3.5%.

Kevin said.

In Kevin's view, the policy orientation of cotton producing countries is also one of the important factors affecting cotton prices, especially the policies of the two major cotton producing countries in China and India.

China has stored about 3000000 tons of cotton this year, and the price of China's cotton market is far higher than that of the international market.

In addition, India's export ban on cotton has also strongly supported cotton prices.

Kevin also said that because farmers can choose to grow all kinds of crops, the price of other crops besides cotton also affects the planting of cotton and further acts on cotton prices.

"Energy prices are also factors that we can not ignore. Energy prices affect not only the cost of planting crops, but also the prices of man-made fibers.

The rise of both will lead to a rise in cotton prices.

What is also important is the dollar exchange rate. Because most cotton trade uses US dollar pactions, if the US dollar goes strong, the cotton price will be raised and the buyer's demand will be weakened.

Kevin said.

Core consumer market lock-in Asia

Generally speaking, the demand of any commodity can be quantified into two values: the number of consumers and the amount of consumption per consumer.

Over the past 10 years, the global population has increased by 11%, from 6 billion to 6 billion 700 million.

Although the growth rate is slowing down, overall, the population is still rising.

The global retail sales per capita increased by more than 90%, from $2000 per capita to $3850, while retail store area grew by 200%, from 40 million square meters to 130 million square meters.

Judging from the global commodity market, not only the number of consumers has increased greatly, but also the purchasing power of individuals has greatly improved.

Since 1995, the world's population has increased by 20%, while the level of consumer purchase has increased by 60%.

In terms of the distribution of consumer spending, the consumption of clothing in developed countries has been decreasing in the past ten years, and Kevin expects that this trend is likely to continue in the next ten years.

Research shows that the United States was in the United States in ~2010 2000

Actual consumption decreased by 7% from $327 billion 400 million to $305 billion 100 million, and by 2020, the figure will continue to decline by 3% to $296 billion 300 million.

The study also shows that China and India have significantly increased their clothing spending over the past ten years and will continue to grow in the next ten years.

According to the current demand growth rate, it is estimated that China will become the largest importing country in the world in 2012.

By 2015, the global population is expected to reach 7 billion, reaching 8 billion in 2025, and the number of middle class will continue to expand.

According to the organization for economic cooperation and development, it is estimated that by 2030, millions of consumers will be added.

90% of the world's new middle class is distributed in Asia, most of them in China and India.

"These growth means that there will be more consumers using cotton products."

Kevin pointed out that strong growth in China and India will lead to a series of economic growth in other countries, especially in South America and Australia, which are rich in resources.

"When these economies develop further and begin to use their own resources, China and India will increasingly turn to other regions, such as Africa, to promote the economic growth of those countries, thus creating more middle class consumers.

In other words, the world will have more consumers, greater purchasing power, and greater market demand.

Kevin said.

"Although the consumer market shows great potential for growth, we are also facing enormous challenges.

A huge potential drag on economic growth in the coming decades is the rise in commodity prices. "

"The supply of land and water in the world is becoming more and more precious as the population and demand increase," Kevin said.

This means that many commodity price increases that we have experienced in recent years continue to be possible.

If consumers are forced to pay for rising prices of food and other necessities, then the proportion of textile and clothing expenditure to new consumers' income will hardly increase.

But in any case, with the growth of people's income and consumption, consumers' demand for cotton will be bigger and bigger. "