Market Analysis: Forecast The Development Trend Of Global Cotton And Clothing Market In 2023

In 22/23, the supply in the northern hemisphere was nearing the end, and the southern hemisphere began to sow. The global cotton output in 2022/23 was basically stable, which was expected to be 25.2291 million tons, the same as the previous year. In addition, India's cotton output is lower than expected, the sales are slow, and the pressure on domestic new cotton has not been fully released, which may bring supply disturbance in the first quarter of 2023.

Overseas inflation is expected to fall back and the pace of interest rate increase is expected to slow, and consumer confidence in major clothing consumer countries will also be restored. It is expected that the 23Q2-3 US apparel inventory cycle is expected to switch to the passive destocking/active replenishment phase, when the demand for domestic textile raw materials will grow relatively significantly.

In 22/23, American cotton is expected to increase production significantly due to the significant increase of planting area. However, due to extreme drought, the seed rejection rate in Texas reached a historical high of 68%, and the yield was reduced due to the significant reduction of harvesting area. Finally, the yield was significantly reduced under the condition of seed expansion. The listing of American cotton is basically coming to an end, and there is little room for output adjustment, which is expected to be about 3.2 million tons.

In the southern hemisphere, the crops in Brazil and Australia in 22/23 years have just begun to be sown. Due to the lack of competitive crops, the expectation is relatively optimistic. The USDA data is expected to produce about 2.9 million tons and 1.09 million tons.

In India, according to the data from the supply-demand balance table of the Indian Cotton Association, India's expected total output in 2022/23 is 5.7758 million tons, a 1.2% month on month decrease, a 10.6% year-on-year increase, and the output is lower than expected and reduced compared with the previous period. In addition, due to the excessive precipitation in the early stage and the reluctance of cotton farmers to sell, India's cotton sales progress is slow: India's cotton annual 2022.10-2023.9 new flowers accumulated to market in 1.362 million tons of lint cotton, a year-on-year decrease of about 43%, which continues to be at a low level in the past five years, or will continue to trigger supply side disturbance expectations.

In 2020, the retail sales of all types of clothing in the United States will decline significantly due to the impact of the epidemic; In January 2021, the "National Strategy for Epidemic Prevention and Response" was announced, and control policies were gradually relaxed. In March 22, the United States announced full liberalization. By December 2022, the retail sales of clothing and clothing accessories in the United States continued to grow from the base of the previous year.

From June 2021 to January 2022, Singapore's strict epidemic prevention index dropped from 58 to 44, while clothing and footwear sales narrowed significantly from - 40% to - 5% year on year. In March 2022, Singapore announced that it would significantly relax a series of epidemic management measures, officially moving towards the stage of coexistence with Singapore Crown, and the strict epidemic prevention index gradually dropped from 43 to less than 20, Garment consumption maintained growth recovery after a short-term impulse recovery.

In 2020, the retail sales of all types of clothing in Japan will decline more due to the impact of the epidemic. In October 2021, Japan announced the full lifting of the declaration of emergency and carried out experiments on liberalization, and the growth rate of retail sales of all types of clothing recovered; In March 2022, the clothing consumption will stabilize as a whole after the control of anti creep is completely lifted.

South Korea has a long period of control. It will be fully liberalized in May 2022. Within five months after the liberalization, retail sales of clothing will maintain a year-on-year growth of about 10%, but then fall into a year-on-year trend decline. The overall recovery of consumption is slow and unsustainable.

From the perspective of the effect of overseas consumption restoration, countries with large consumption stimulus policies, relatively late exit time, more savings release, and early opening up, such as the United States and Singapore, have a good degree of consumption restoration, and the pace of restoration is often fast; On the contrary, consumer repair is not ideal, such as the United Kingdom, South Korea, etc; In addition, in countries with differentiated factors such as subsidies, incentives, and opening up time, such as Japan, Germany, and Vietnam, the situation of consumer repair is general, and most of them focus on stabilizing. From the perspective of the pace of overseas consumption repair, after the optimization of epidemic prevention policies, the economy usually needs a quarter of adjustment period, and then economic activities gradually return to normal. In the United States, where the amount of financial subsidies is high, the propensity to consume rebounds to the level of 2019 in the first quarter after the economic restart. The consumption tendency of residents in East Asian economies such as Japan and South Korea also increased after the adjustment of epidemic control policies.

Since 2022, the Federal Reserve has continuously raised interest rates and shrunk the balance sheet to cope with the severe inflation situation. The tightening policy has now achieved good results. In December 2022, the U.S. CPI fell 0.1% month on month, the first time it has turned negative since November 2022. The year-on-year growth rate of the Federal Reserve fell rapidly for three consecutive months, hitting a 14 month minimum. With the significant easing of the pressure on the global supply chain, the inflation pressure may tend to ease. With the continuous reflection of the effect of the tightening policy, the continuous improvement of the supply chain, and the superposition of a higher base in 2022, the U.S. inflation will further fall in 2023. It is expected that the CPI will slow down to 4-5% year-on-year in March. Judging from the consumer confidence index of major clothing consumer countries, the United States, the euro area and Japan have all recovered. It is expected that in 2023, the Federal Reserve will slow down the interest rate increase after the 25 basis points of interest rate increase at the March meeting. The inhibition of interest rate policy on the demand for major overseas textiles and clothing will be eased, and consumer confidence will be boosted accordingly.

From the perspective of the inventory cycle of American clothing, the first two quarters of 2022 are still in the replenishment period. As the epidemic situation in the past two years has repeatedly reduced social activities, and with the basic liberalization of epidemic prevention and control measures in the United States since 2022, the resumption of social activities has also increased the demand for clothing and brought replenishment to the industrial chain. Since the third quarter, middle and downstream wholesalers and retailers in the U.S. apparel industry have further digested the expectation of the U.S. economic recession and actively reduced inventory to reduce operating costs. According to the current absolute inventory level, this round of destocking may last for more than 6 months, so it is expected that the inventory cycle of American clothing in the 2-3 quarters of 2023 is expected to switch to the passive destocking/active replenishment phase.

From the perspective of major overseas footwear and clothing brands, international footwear and clothing leaders generally increase their stock due to the problems of global supply chain interruption and prolonged shipping cycle in 2020-2021, and the current inventory is high. As of the end of the latest disclosed financial quarter (NIKE as of 22/11/30 quarter, Adidas as of 22/9/30 quarter, VF as of 22/10/1 quarter, Fast Retailing as of 22/8/31 quarter), Nike/VF inventory had increased by 43%/88% year on year, significantly higher than revenue growth; The double digit inventory of NIKE Greater China has declined and returned to the normal level, while the inventory pressure in overseas markets still exists. The period of brand destocking is usually 2-4 quarters. It is expected that overseas brands are expected to complete inventory digestion in the 2-3 quarters of 2023, when the demand for domestic textile raw materials will increase relatively significantly.

In terms of supply, the supply in the northern hemisphere in the year 22/23 is nearing the end, and the southern hemisphere has begun to sow. The global cotton output in 2022/23 is basically stable, and is expected to be 25.2291 million tons, which is the same as the previous year. We can focus on the first cotton supply and demand outlook of the US Department of Agriculture for the year 23/24 in February 2023. In addition, India's cotton output is lower than expected, the sales are slow, and the pressure on domestic new cotton has not been fully released, which may bring supply disturbance in the first quarter of 2023.

Overseas inflation is expected to fall back and the pace of interest rate increase is expected to slow, and consumer confidence in major clothing consumer countries will also be restored. It is expected that the 23Q2-3 US apparel inventory cycle is expected to switch to the passive destocking/active replenishment phase, when the demand for domestic textile raw materials will grow relatively significantly.