Cotton Imports Fell 33% In The First Half Of This Year And US Cotton Rose This Year.

It is hard enough to find commodities that are still showing gains this year, and at the same time be able to put pressure on the fundamentals.

However

That's the goal.

To be more precise, it is

Intercontinental Exchange (ICE) deals with cotton futures.

ICE cotton rose 5.2% from the beginning of this year to the close of July 21st.

Although the past few cycles of cotton fell along with the overall commodity market, it closed at 64.24 cents per pound on Tuesday, which is still not far from the high of 69.13 cents this year, which reached 29 in June.

Curiously, why is the US cotton rising this year?

China, the biggest importer of cotton, has significantly reduced procurement this year. It also announced that it would sell large quantities of national cotton reserves, and China's number of cotton reserves is also the world's largest.

The US Department of agriculture (USDA) has raised global cotton inventories and lowered China's demand forecast for the largest consumer countries.

The United States Department of agriculture is probably the most concerned cotton forecasting agency.

If this is not enough, competition from artificial fibers such as polyester fibers is intensifying as crude oil prices decline and the medium term remains weak.

Crude oil is the raw material for producing many man-made fibers.

According to customs data, China's cotton imports fell 26% from June to 161775 tons in the same period last year.

China's cotton imports have dropped by 33% so far this year, and imports of 933779 tons in the first half.

China's cotton import prospects are also not optimistic in the second half of the year.

Compared with domestic supply, the price of international cotton is still too high, and most import quotas have been used.

The annual quota of cotton imports in China's factories is 894000 tons, and import tariffs exceeding the quota or within the quota system should be 40%.

China's imports are further empty signals. The government encourages the purchase of domestic cotton by selling the national cotton store.

The plan is to sell 1 million tonnes of national cotton reserves by the end of August, aiming at gradually reducing about 11 million tons of huge cotton reserves.

Of these reserves, 80% were purchased in support of domestic cotton growers in 2011-2013 years.

But I am afraid that the actual situation is not necessarily consistent with the plan. In the first week sales of the national cotton store, the turnover ratio is only 8.8%.

Sale of state cotton is bad.

In the week of July 17th, the first week sales of State Cotton stores did not work well, or prompted the authorities to lower prices to boost sales. This may also indicate that demand is so weak that even if prices drop again, it will be difficult to attract buyers.

In any case, it does not bode well for China's cotton demand. It can be seen from the trend of cotton futures in the Zhengzhou Mercantile Exchange.

Zheng cotton index contract closed at 12580 yuan per ton on Tuesday, about 91.89 cents per pound, down 4% compared with the beginning of the year.

Although the contract price is still nearly 50% higher than the ICE contract of the same kind, if the latter plus import and pportation costs, the price gap with China will be narrowed.

Subject to

The impact of the sale of cotton prices tend to go down in China, so it seems that the import of cotton will not be competitive for domestic cotton in the second half of this year.

The US Department of Agriculture estimates that China's cotton imports will fall to 5 million 750 thousand packages (1 million 250 thousand tons) in 2015/16, which will be the lowest since 2002/03, and about 30% less than that in 2014/15.

In view of the fact that China's cotton imports are more than the total number of three importing countries ranked second to fourth, and with the global stock still abundant, such a sharp decline in China's imports is bound to cause a negative impact on cotton prices.

The reason why ICE cotton prices have been stronger than other markets this year may be that US exports to China are not as weak as the general trend. The first half of this year has increased by 11% to 436542 tons.

However, if China's cotton imports continue to decrease in the second half of the year, the US cotton exporters will not be spared, and the ICE cotton prices will also be down.