USDA: American Cotton Tends To Be Cautious When China Signs A Contract In 2023/24

According to the USDA Export Weekly Report, on November 17-23, 2023, the contracted export volume of American upland cotton in 2023/24 will be 49418 tons, 32% lower than that of the previous week. However, if the contracted volume of China is deducted from 14700 tons, the total contracted volume of other countries will be 34700 tons, which is 19300 tons higher than that of the previous week, Therefore, the decrease of China's contracted volume is the key to the decrease of nearly 1/3 of the contracted volume of American upland cotton compared with the previous week (the contracted volume of China is 14651 tons, a significant decrease of 73% compared with the previous week, less than 30% of the total contracted volume of American upland cotton that week).

Some cotton trading enterprises said that on November 17-23, the main contract of ICE cotton continued to consolidate in the range of 80-82 cents/pound, "Not falling down, not rising up" makes purchasers fall into the wait and see situation and the internal and external cotton prices are significantly narrowed from more than 800 yuan/ton to 200-300 yuan/ton under the sliding standard tariff that week (the competitiveness of domestic cotton is significantly improved, and the performance price ratio of imported cotton is falling back), or it is the reason why the contract signing of American cotton in 2023/24 falls sharply month on month.

Several cotton enterprises in Qingdao, Zhangjiagang and other places reported that since the middle and late November, domestic cotton mills and traders' interest in inquiry and signing of American cotton this year has declined or is also related to the following factors:

1、 With the accelerated collection, processing and sorting of American cotton in 2023/24, buyers' concerns about the grade and quality of American cotton have not abated. According to USDA statistics, as of November 23, the cumulative inspection of American upland cotton in 2023/24 was 1.5063 million tons, a year-on-year decrease of 8.6%; The proportion of reaching the warehouse receipt standard was 79.5%, an increase of 0.1 percentage points over the previous week and a decrease of 4.2 percentage points over the same period of the previous year.

2、 Chinese purchasers have strong expectations for the continued appreciation of the RMB and the reduction of the cost of imported cotton in 2023/24. Throughout November, the spot exchange rate of the RMB against the US dollar rose by 1866 points, up 2.55%. The highest rise in the month was 7.12, a new high in more than five months. Over the past three years, there have been two rounds of sharp appreciation of the onshore RMB against the US dollar, and this is the third round. The first two revaluations exceeded 8700 basis points and 6300 basis points respectively, and the maximum appreciation of the current round of RMB was only 2300 basis points. Compared with the history, there may be greater room for appreciation.

In addition, since the middle of November, the basis difference between Brazilian cotton bonded, spot shipment and American cotton has gradually widened to 2.5-4 cents/pound, and the performance price ratio of Brazilian cotton in 2022/23 has continued to improve. Considering the uncertainty of American cotton quality in this year, some buyers, in addition, will issue an additional 750000 tons of sliding tariff quota in 2023 until the end of February 2024, Therefore, the inquiry and purchase of medium and high index Brazilian cotton are expanded instead.