Cotton Enterprises Expect China To Improve Policies To Solve The Imbalance Between Supply And Demand In Cotton Market

Joe Nicosia, CEO of Ellenburger, pointed out in his analysis of the cotton market recently that the supply and demand of the cotton market are extremely unbalanced at present, and the global cotton output has exceeded the consumption for two consecutive years, leading to the global ending inventory rising to a historical high of 15.67 million tons in 2012/13. Global production and demand have undergone disruptive changes in just two years. From a serious shortage of supply in 2009 to a serious surplus in 2011, there are two main reasons: first, the global average cotton yield has increased significantly; Second, the demand for cotton decreased significantly.

Nicosia said that in the past 20 years Global cotton The average per unit area yield increased by 36%, especially in India, which made the global cotton per unit area yield level move forward a big step. At the same time, with the slowdown of economic growth, global cotton consumption has dropped from 26 million tons before the economic crisis to more than 23 million tons at present. High cotton prices have also forced textile mills to reduce the proportion of cotton in spinning, resulting in a 4% reduction in cotton consumption and a 2% increase in chemical fiber consumption, which is one of the reasons for the increase in cotton stocks. From what we know, global consumers may prefer cotton products, but they are unwilling to buy them. Therefore, cotton is difficult to regain its lost market share. The decline in demand has become a thorn in the cotton market.

Nicosia believes that at present International cotton price It remains relatively high because of China's policies and the recent soaring prices of corn and soybeans. This year, China absorbed most of the supply from the domestic market in the form of higher prices. Although it did not help the international cotton price rise, it created a bottom price for the international cotton price. Affected by the government's massive collection and storage, China has cumulatively imported about 5 million tons of cotton and purchased 3.13 million tons of domestic cotton this year. Due to the excessive inventory in other parts of the world, it is very difficult for the government to dump the inventory at present.

Nicosia said that China's current policy is to support domestic cotton farmers through higher prices. Maybe after the 18th National Congress, the government will pay more attention to the textile industry, effectively promote cotton consumption, digest and reserve cotton stocks, so as to better help the development of the cotton textile industry. At the same time, global cotton stocks have become too large. If China throws away its stocks, American cotton exports will be reduced to less than 2 million tons or even lower, while American stocks will increase significantly.