Inventory Consumption Is Lower Than Cotton Prices Overall Trend Upward Trend

In the year of 2016/2017, cotton prices in India (15355, 30, 0.20%) continued to rise, and domestic cotton prices remained high and volatile since late January 2017.

China has already opened the curtain of the reserve cotton rotation, and the price of Zheng cotton has been broadly concussion.

In the US, the On-Call price contract is at a historic high and the US cotton price is hovering below 80 cents.

What is the situation of cotton supply and demand in India? Can the future market lead the global cotton price to rise for the first half of the year? From the historical trend, India new cotton began to harvest from October to November. As the supply of concentrated listing period increased, prices tended to decline rapidly. Until March to April next year, prices would remain low or continue to be low; from May to June to the new cotton market, prices tended to remain strong.

In 2016/2017, from September to November, the price of cotton in India showed a downward trend at the early stage of the new cotton market, but the following two events pushed up the trend of cotton prices.

First, in November 8, 2016, the India government's action to scrap currency led to a phased decrease in the seed cotton market in India, and the cotton price rose steadily in the middle and late of the month after the India cotton price rose.

Second, in December 2016, India issued a notice, CCI to ensure the needs of domestic textile enterprises, start the commercial nature of the lint purchase, causing cotton prices to accelerate the rise.

In addition, the March USDA supply and demand forecast report shows that

Cotton production was 5 million 880 thousand tons, compared with 5 million 750 thousand tons last year.

India officials expect its cotton output to be about 5 million 800 thousand tons, up from 5 million 750 thousand tons last year.

Data show that in early March, about 65% of cotton in India was listed, down from 70% in the same period last year.

India official expects to import 290 thousand tons this year, down 50 thousand tons compared with last year.

USDA expects to import 480 thousand tons, an increase of 250 thousand tons over the previous year.

On the export side, India officials expect to export 850 thousand tons this year, down from 1 million 170 thousand tons a year ago.

USDA expects to export 980 thousand tons this year, up from 1 million 260 thousand tons last year.

As of early March, cotton exports in India amounted to about 710 thousand tons, representing a decrease of about 20% over the same period last year.

In terms of CCI acquisition, about 144 thousand tons were acquired in MSP in 2015/2016, and about 255 thousand tons were planned for commercial purposes in 2016/2017.

In terms of consumption, India officials slightly increased its domestic consumption from 20 thousand tons to 5 million 320 thousand tons, while USDA lowered its domestic consumption from 110 thousand tons to 5 million 170 thousand tons.

The new supply and demand situation in India this year, the India balance sheet given by USDA shows an oversupply of 210 thousand tons, and the balance sheet provided by India official shows a supply gap of 80 thousand tons.

If we consider the CCI purchase volume in two, the USDA data show an oversupply of 70 thousand tons, and official data in India show that the supply gap is 330 thousand tons.

From a global perspective, inventory consumption ratio is lower.

The overall trend is upward.

India cotton may have the following two kinds of impacts on global cotton prices: first, if it proves that India's domestic supply and demand gap in the current year or its domestic cotton prices remain high, it will further lead the buyers to buy the US cotton, which may support the global cotton price to maintain high level; secondly, if the current high cotton price in India restricts its domestic consumption and the export of cotton and cotton yarn, it may be a drag on global cotton prices.

At present, the main risk of the market lies in India's cotton production exceeding expectations and China's policy of dumping and storage.

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