Global Perspective: Explore Cotton Market And Present Internal And External Market Analysis

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The report of relevant organizations has not fully realized the fact of cotton production reduction in India. By the end of March, in 2021/2022, India had listed 4.4656 million tons of cotton, down 19.61% from the level of 5.5549 million tons in the same period last year. Compared with the listing progress in December last year and January this year, the year-on-year decline in the number of Indian cotton has narrowed, indicating that the delivery and processing speed of new Indian cotton has increased. However, the cotton association of India said that nearly 80% of the new cotton was on the market, and estimated that the cotton production in 2021 / 2022 would reach 5.6972 million tons, only 5.06% less than that in 2020 / 2021. Compared with the current listing progress, cotton association of India is expected to further reduce cotton production in India.

As can be seen from the weekly US cotton export report, the negative feedback of high prices is being reflected globally. As of March 31, the net contracted amount of Upland Cotton in the United States was 14300 tons, a decrease of 38800 tons on a month on month basis, including 8900 tons for Vietnam, 5400 tons for Turkey and - 5000 tons for China. At the same time, as of April 1, the unpriced sales contracts of American cotton in May decreased by 22.5% month on month. Compared with the previous week, the unpriced sales contracts of American cotton in July increased by 5% to 54902 lots, the highest level in the same period in recent years.

Under the pressure of the expected reduction of cotton output in India, China's cotton market is dominated by its own fundamentals, following the weakness of the external market. As of April 7, the sales rate of 60 large and medium-sized cotton processing enterprises in China was only 46.6%, a decrease of 40 percentage points on a year-on-year basis, and a decrease of 24.9 percentage points compared with the average of the past four years. Behind the sharp slowdown in lint sales is still the continuation of the deadlock between ginning plants and textile enterprises. The former is facing the passive situation of loss sales, while the latter is gradually reducing the operating rate due to the poor transmission of downstream costs and production losses, and the willingness to purchase lint is weak. However, with the further consumption of raw material inventory of textile enterprises, replenishment power may form a support for cotton prices.

The rise in cotton prices in the harvest season last year has given global cotton farmers full willingness to plant, and the expectation of expanding and increasing production is warming up. Australia and Brazil, the main cotton exporting countries in the southern hemisphere, are likely to see a substantial increase in production. According to the U.S. Department of agriculture, Australia will harvest 1.197 million tons of cotton in 2021 / 2022, an increase of 96.23% over the previous year. However, the report released by the General Administration of commodity supply of Brazil once again increased the cotton output of Brazil this year to 2.8243 million tons, an increase of 19.7% year-on-year.

However, cotton production expectations in the northern hemisphere are increasingly difficult to meet. Although relevant organizations once affirmed the expansion expectations of India, China and the United States, the United States, the largest cotton producing countries in the northern hemisphere, predicted in the planting intention report released by the U.S. Department of agriculture at the end of March that the cotton planting area in the United States would reach 12.234 million mu in 2022 / 2023, an increase of 9.04% compared with the actual planting area last year. However, the cotton planting area could not be listed and exported until after the second quarter. According to the survey and statistics of the national cotton market monitoring system in the first ten days of March, the intended planting area of cotton in China will increase by 1.8% to 43.98 million mu in 2022, and the intended planting area in Xinjiang will increase by 2.3% to 36.681 million mu. In addition, according to the prediction of Cotton Association of India in February, the cotton planting area of 10 major cotton producing states in India will be expanded by 20% - 25%. However, due to the recent rise in food prices and weather factors, the growth of cotton planting area in India is expected to decline slightly this year.

At the same time, the conflict between Russia and Ukraine has added uncertainty to global agricultural production, which may hinder cotton expansion and yield increase expectations. First, Ukraine, as an important agricultural producer, is affected by the conflict. Relevant agencies estimate that the country's grain and oil crops will reduce by 55% and 38% respectively this year. Second, the sharp rise in energy prices has further triggered inflationary pressure in the European and American markets. In order to alleviate the inflationary pressure, the proportion of bioenergy consumption in food crops may increase, which will further stimulate the price of food crops and further affect the global farmers' intention to grow cash crops such as cotton. Third, Russia, as a major exporter of potash fertilizer, was affected by the conflict between Russia and Ukraine, and the limited export of potash fertilizer directly led to a sharp rise in global fertilizer prices.

In addition, relevant data showed that as of April 12, the ex factory price of potassium chloride in Qinghai Salt Lake was 3500 yuan / ton, up 48.94% year-on-year, urea 34.43% and monoammonium phosphate 42.86% respectively. As a cash crop, the demand for chemical fertilizer in the growing process of cotton is higher than that of other food crops. According to the past data, the cost of chemical fertilizer accounts for 16% - 20% of the total production cost of cotton. The price increase of chemical fertilizer will further reduce the income expectation of cotton farmers, thus inhibiting the planting intention of cotton farmers.

On the whole, affected by the overseas environment in the short term, the external market is still likely to rise, forming a support for the domestic market. Once the international supply side contradiction is relieved, the outer disk drive will be significantly weakened, which will limit the space above Zheng Mian.