Global Economy: Analysis On Cotton Production And Marketing Status Of Global Industrial Clusters

　　 Meimian: the harvest progress is generally normal

In the November report, USDA raised the US cotton output by 59000 tons month on month to 2.85 million tons, 300000 tons lower than the previous year. From the perspective of production period, the US cotton output fell to a low level in nearly 10 years, and the annual export also decreased significantly. However, Brazil's high yield and Australia's high yield, combined with the low global demand for cotton textiles, led to a lack of supply in the cotton market in the medium term. The inventory of clothing and fabrics in the United States is still in the process of de stocking, with the high point in the fourth quarter of 2022 and the continuous de stocking process in 2023. From the absolute inventory data, it may be necessary to wait until the first half of 2024 to complete the entire inventory reduction, and then the United States may start a new replenishment cycle.

As of November 19, the cotton harvest rate of the 15 major cotton growing states in the United States was 77%, compared with 78% in the same period last year, 10 percentage points higher than the previous week, and 6 percentage points higher than the average level in the same period of the last five years. As a whole, the progress of American cotton harvest was normal. By the week of November 16, the inspection volume of American upland cotton had reached 1.2644 million tons, and the inspection progress had reached 45.55%, down 10.8% year on year. Among them, 14600 tons of Pima cotton were inspected, and the inspection progress reached 18.9%, down 53.8% year on year; The cumulative inspection volume of American upland cotton and Pima cotton is 1.279 million tons, accounting for 44.9% of the estimated annual American cotton output.

As of November 17, the seller's unpriced contracts on the American Cotton on-call-2312 contract had been reduced by 4989 to 4704, or 110000 tons, a decrease of 110000 tons from the previous week. In 2023/24, the total number of unpriced contracts of the seller will be reduced to 70215, which will be 1.59 million tons, 60000 tons less than the previous week. The total number of open price contracts of ICE sellers was reduced to 70590, equivalent to 1.6 million tons, 2800 less than the previous week, equivalent to about 60000 tons. Among them, the number of on call contracts of 2403 is relatively low in recent years, which can basically correspond to the weak performance of American cotton. In the medium term, the approximate rate of American cotton maintains a large range oscillation, but in the short term, the height of each rebound is limited, and the trend is weak.

　　 India: annual output still needs to be tracked

The Indian Cotton Association (CAI) recently released the data of Indian cotton in 2023/24 for the first time. The output 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 USDA still estimates 5.443 million tons. According to the data released by AGM, as of the week of November 26, the weekly listing volume of Indian cotton was 162400 tons, 90200 tons more than the previous week, and the cumulative listing volume of Indian cotton in 2023/24 was about 1164800 tons (the statistics may include the aging cotton in 2022/2023).

In September, India's textile exports reached US $1.43 billion, the lowest monthly export volume since October last year. Exports to the United States were 552 million dollars, down 16% month on month; Exports to the EU and the UK were 415 million US dollars, down 17% month on month; Exports to the United Arab Emirates were 103 million US dollars, down 8% month on month. So far, India's textile exports this year have reached US $15.37 billion, down 14% from 2022. Since this year, India's textile and clothing exports have not been ideal. The downstream operating rate has continued to be weak. Global demand is in a downward cycle, and it is still difficult to improve in the short term.

　　 Brazil: output remains high

USDA estimates that Brazil's cotton output will reach 3.17 million tons in 2023/24, and its export will reach 2.57 million tons, an increase of 1.12 million tons year on year. Brazil's output will surpass the United States and become the world's third largest cotton producer. Brazil's output may continue to remain high in the next year.

In Mato Grosso, Brazil's largest agricultural state, extreme drought has forced farmers to give up planting soybeans and switch to cotton or other crops. The total cotton area in Mato Grosso will increase by 8% in 2023/24, reaching about 1.3 million hectares.

According to the latest report of the Cotton Producers Association (ABRAPA), Brazil's cotton output in 2023/24 is expected to be 3.3 million tons, which is based on the planting area of 1.814 million hectares and the average lint yield of 1818 kilograms per hectare. In contrast, the Brazilian National Cotton Council (CONAB), the official forecasting agency, released a forecast report in advance, and predicted that the cotton output would be 3.0399 million tons. This data is based on the planting area of 1.7331 million hectares and the average output of 1754 kilograms per hectare.

　　 Domestic: Medium term fundamentals are not optimistic

At present, the sales of domestic reserve cotton have stopped. From July 31 to November 14, the total volume of transactions was 884700 tons, with an average transaction rate of 74.81% and an average transaction price of 17274 yuan/ton. Last week, the average purchase price of Xinjiang machine-made cotton was concentrated at 7-7.2 yuan/kg, and the purchase of new cotton was drawing to a close. The basic cost of new cotton was fixed. Overall, the cost of new cotton was still 16500-17000 yuan/ton. As of November 26, the total processing volume of Xinjiang lint was 3.2949 million tons, a year-on-year increase of 38.08%. At present, the acquisition is at the end, and the daily processing volume is still high. We continue to pay attention to the processing situation. The market expects the output of Xinjiang to be about 5.3 million tons.

As of November 24, the cotton raw material inventory of textile enterprises had been 28 days, an increase of 0.1 day month on month; The startup rate of textile enterprises was 47.5%, a decrease of 1.2 percentage points month on month; Textile enterprises' cotton yarn inventory was 36.4 days, an increase of 2.4 days month on month; The cotton yarn raw material inventory of the textile mill was 5 days, with a month on month decrease of 0.2 days; The operating rate of the weaving mill was 48.5%, 1.8 percentage points lower than that of the previous month; The grey fabric inventory of the textile mill was 34.2 days, an increase of 0.9 days month on month. Last week, Zheng Mian fell significantly and fluctuated greatly. Due to the price drop, spot transactions improved slightly, but the overall performance was still average. Textile enterprises continued to accumulate cotton yarn inventory, terminal orders were insufficient, cotton yarn prices continued to fall, and demand was still insufficient. Similarly, textile enterprises are cautious about cotton procurement, focusing on rigid demand. From the perspective of fundamentals, the medium-term cotton fundamentals are still not optimistic.

Due to the continuous decline of spinning enterprises' startup rate, the domestic demand is in the traditional off-season, the cotton yarn inventory is high, and the terminal orders are insufficient. It still takes some time to digest the cotton yarn inventory. The spinning enterprises mainly meet the rigid demand for cotton procurement, resulting in the ginning plant's cotton sales progress is significantly slow. As the panel continues to hang upside down, the ginning plant is also waiting for the panel hedging opportunity.

To sum up, the short-term direction of American cotton is unclear, and in the medium term, it may still maintain a large range oscillation. Recently, the weekly signing data of American cotton has improved, but the annual signing progress is still slow; The northern hemisphere is in the cotton harvest period, the global demand for textiles and clothing is still weak, and the terminal continues to be destocked; From the perspective of the pace of destocking, the destocking may be completed in the first half of next year, and the global demand may turn around. (Author: Cao Kai Futures Investment Consulting Practicing Certificate No. Z0017365)