Economic Observation: What Are The Factors That Lead To The Cold Offer Of Indian Cotton

From the quotation resources of some international cotton merchants and traders, not only are there few Indian cotton in 2022/23 (including S-6, MECH, J34, etc.) with shipping dates in October/November/December, but there is almost no shipment and no quotation of Indian cotton in 2023/24. Up to now, although there is still a small amount of customs clearance cotton in 2022/23 for sale in Qingdao Port (M1-5/32 Qiangli 29/30/31GPT), However, the price difference with Brazilian cotton spot M1-5/32 is only 400-500 yuan/ton, and the competitiveness is also insufficient. Cotton enterprises in Zhangjiagang, Nantong, Nanjing and other places feedback that Indian cotton in port bonded and customs clearance is very scarce in stock, and cotton textile mills and middlemen are very inactive in making inquiries and placing orders.

The cold and quiet offer of Indian cotton may be related to the following factors:

First, India's cotton output in 2023/24 fell significantly year on year, and processing enterprises and relevant departments were worried about the shortage of domestic cotton supply. The Indian Cotton Institute (CAI) released for the first time that India's cotton output in 2023/24 is expected to be 5.017 million tons, a decrease of 404000 tons, or 7.5%, from 5.421 million tons in the previous year, the lowest level in 15 years.

Second, the purchase volume of CCI increased significantly this year, and the fluidity of lint decreased. According to the data released by CCI, as of the beginning of November, 2.88 million bales of lint had been on the market (about 480000 tons, mainly from the northern and central cotton regions), and the cumulative listing volume announced by AGM was 930000 tons. Theoretically, the purchase volume of CCI may account for 20-30% of the Indian cotton market; The main reason is that the difference between the current market price of seed cotton and the MSP purchase price is significantly narrower than that in the previous two years, and private ginning plants have a heavy water and miscellaneous deduction.

Third, since the end of October, ICE12 contracts have broken 85 cents/pound, 80 cents/pound, and 75 cents/pound, and the reduction of Indian cotton prices is significantly weaker than ICE. Therefore, the FOB/CNF quotation of Indian cotton for November/December/January shipment is significantly less competitive than that of Brazilian cotton. The price of Indian cotton S-61-5/3229GPT, which is the main port of China during the shipping period from November 14 to December, is 89-92 cents per pound. The price of Brazilian cotton M1-5/32 is only 89.70-92.50 cents per pound during the same shipping period. Obviously, the performance price ratio of Indian cotton is insufficient.

Fourth, with the low cost performance ratio of Indian cotton, less exports and the decline in credibility of some Indian cotton exporters in recent years, coupled with the decline in consumption demand for imported cotton, the improvement of quality indicators and other factors, the attention of Chinese buyers to Indian cotton continues to decline. Some textile enterprises in Shandong, Jiangsu, Henan and other places have moved Indian cotton out of the purchase list, so it is not difficult to understand international cotton merchants Traders operated less Indian cotton.