USDA Data: Worries About Global Cotton Supply Remain

Worries about global cotton supply still exist, so it is necessary to pay close attention to USDA supply and demand forecast. The US nonfarm employment population increased by 336000 in September, the largest increase since the beginning of this year. Market concerns about the strong labor market provide reasons for the Federal Reserve to raise interest rates again. The yield of 10-year and 30-year US bonds once soared to 4.86% and 5.05%, reaching the highest level since the 2008 financial crisis.

In terms of cotton market, the growth of American cotton has not improved. Data from the United States Department of Agriculture (USDA) showed that as of October 1, the excellent rate of American cotton was 30%, 1 percentage point lower than that of the same period last year. As of October 3, about 43% of the cotton regions in the United States experienced drought, which was larger than the previous week.

Pakistan's cotton production may decline. Some international organizations predict that Pakistan's total cotton output in 2023/24 will not exceed 1.2 million tons, because the damage to cotton yield caused by insect disasters in the middle and late August is higher than predicted, and some cotton producing areas will suffer from floods in June and July.

In terms of the textile market, according to the survey of the International Textile Manufacturers Federation (ITMF), the global textile industry continued to suffer from poor operation in September, and companies in the entire textile value chain were struggling to cope with the problem of rising costs and weak demand.

In the short term, risks in the global financial market still exist, and the downstream demand of the cotton market recovers slowly. However, the uncertainty of cotton supply due to weather changes is still one of the main factors affecting cotton prices. It is necessary to pay close attention to the forecast data of global cotton supply and demand to be released by USDA in the near future.

The purchase of domestic new cotton is slowly launched, and attention should be paid to preventing market risks. According to the data from the National Bureau of Statistics, the manufacturing purchasing managers' index, the non manufacturing business activity index, and the comprehensive PMI output index in September were 50.2%, 51.7%, and 52.0% respectively, up 0.5, 0.7, and 0.7 percentage points over the previous month. The three indexes are all in the expansion range, and China's economic prosperity has rebounded.

In the cotton market, the enthusiasm of enterprises to purchase imported cotton was gradually released after the central reserve cotton was successively rotated and the sliding tax quota for cotton import was issued, and the domestic cotton supply was generally loose. The cotton in the mainland has generally entered the picking period, and the purchase progress is slow, with the mainstream purchase price of 8.2-9.2 yuan/kg; Xinjiang machine picked cotton is weighed sporadically, and the price is concentrated in the range of 7.5-8.2 yuan/kg, but no mainstream purchase price has been formed. It is expected that the centralized listing time will be around the middle of October.

In terms of the textile market, domestic textile and clothing consumption has not improved significantly, especially with fewer export orders, high cotton yarn inventory, and declining operating rates in some regions in late September.

On the whole, under the background of relatively sufficient domestic cotton supply and lower than expected recovery of downstream market demand, the expectation of harvesting new cotton has cooled, but it is necessary to pay close attention to the purchase price, processing progress, new cotton output and quality of seed cotton, and pay attention to risk prevention.