[Market Analysis] Outlook For The Future Market: Improving The Supply And Demand Pattern Is Expected

As of March 31, Zheng Mian had closed at 14325 yuan/ton, up 65 yuan/ton in the first quarter, or 0.46%. The main force of American Cotton closed at 82.83 cents/pound, down 0.57 cents/pound in the first quarter, down 0.68%.

Analysis of cotton fundamentals

（1） Declining cotton planting intention in the new year

According to USDA crop planting intention report, the planting area of American cotton in 2023/24 is 11.256 million acres, an increase of 13.2% year on year; However, as the abandonment rate increased by 8.6% to 19.7%, the harvested area only increased slightly by 2.3% to 4.13 million hectares on a year-on-year basis; The total output is expected to be 3.96 million tons, an increase of 3.3% year on year, due to the small increase in area and unit yield; Although the inventory at the end of the period increased, the ratio of inventory to consumption was basically flat under the expected slight increase of both export and domestic demand. However, since the first ten days of January this year, the rainfall in the northwest of Texas has been maintained at a low level, and the cotton planting area is experiencing severe to extreme drought. As of the first ten days of March, a large area has entered an abnormal drought state, which is expected to be difficult to improve in the short term, and cotton planting is facing challenges.

According to the estimate of cotton planting area made by China Cotton Monitoring System in March, it is estimated that China's cotton harvest area in 2023/24 is expected to be 43.891 million mu, a year-on-year decrease of 4.9%, and the expected output is 6.17 million tons, a year-on-year decrease of 8.2%; Among them, the planting area in Xinjiang is 38.425 million mu, down 2.3% year on year, and the expected output is 5.767 million tons, down 7.4% year on year.

（2） Weak external consumption, rising domestic demand, healthy inventory in all sectors of the industry

In January and February, the retail sales of clothing in China reached 189.48 billion yuan, up 7.88% year on year; China's retail sales of clothing, shoes, hats, needles and textiles reached 254.9 billion yuan, up 7.02% year on year. In January and February, China's clothing and clothing accessories exports amounted to 21.678 billion US dollars, down 14.86% year on year; The export value of textile yarns, fabrics and products reached US $19.165 billion, down 22.54% year on year.

In February, the grey fabric inventory was 34.76 days, down 1.31% year on year, and the yarn inventory was 18.55 days, down 36.8% year on year. The end market inventory was reduced.

According to the statistics of the national cotton trading market, as of March 28, 2023, the total lint processing volume in Xinjiang has reached 6.139 million tons, an increase of 15.73% year on year. In 2022, the annual inspection of cotton nationwide will be 6018600 tons, an increase of 13.82% year on year. At present, the daily processing capacity of Xinjiang cotton is more than 1000 tons. It is estimated that some ginning plants in southern Xinjiang will reduce processing to April, and the output of Xinjiang cotton in 2022/23 may reach 620-6.3 million tons.

3、 Future prospects

In the first quarter, the cotton price range fluctuated, and the speed up of the listing of old cotton and the moderate recovery of downstream consumption made the cotton price operation under pressure and support. Looking forward to the future, although the external demand is still weak, the domestic market orders have recovered, and the inventory pressure in all links of the cotton industry chain is not large. Under the expectation of order recovery, the demand for replenishment may increase significantly. From the supply side, in April, cotton in the northern hemisphere entered the planting season, and China's cotton planting area is expected to decline, and the planting season is easy to cause weather speculation. Focus on the global planting area, weather conditions in planting season, de stocking and replenishment in all links, and market orders.