Market Observation: Pay Attention To The Recent Trend Analysis Of Cotton Market Outside The Industrial Cluster

Review of the cotton market: Due to the lower inventory at the end of this year than in previous years, the price of American cotton rose significantly due to the impact of funds in the earlier period. However, with the recovery of warehouse receipts and the general performance of the contract progress in the current month, and under the impact of the expected production expansion of American cotton in the new year, the price of American cotton began to return to its own fundamentals. Therefore, the price trend of American cotton in March fell compared with the previous year, It dropped from the previous highest 101.39 cents/pound to the current 90.97 cents/pound (a decline of - 10.28%). Although the commercial inventory of Zheng Mian in February decreased, it was still at a relatively high level over the years. At present, the processing of new cotton is basically coming to an end, the overall processing volume is at the middle of the same period over the years, and the short-term supply side is still in an adequate state; Although the sales progress of new cotton on the demand side has increased, the overall performance is still relatively slow, which is at a low level in the same period over the years. The downstream order increment is limited. The trend of "gold, three silver and four silver" peak season is not strong, and the yarn inventory in some regions has accumulated. In conclusion, the price trend of Zheng cotton in March was weak, following that of American cotton, and the trend was slightly weak, Since the beginning of March, it has dropped from 16400 yuan to 15800 yuan/ton (- 3.6%).

International market outlook:

As the current cotton grain price ratio is at a high level, there is a certain optimistic expectation for American cotton planting. According to the USDA global planting forecast in the middle of February, the approximate yield rate of American cotton in the new year will increase (it is recommended to pay attention to the USDA cotton planting forecast at the end of March); From the demand side, it is unlikely that the current global consumption will recover in the short term, and the contracting performance of American cotton generally makes the current basic level of American cotton relatively empty. It is expected that the trend of American cotton will be slightly weak in April, but it does not rule out the possibility that the inventory at the end of this year is at a relatively low level over the years and will continue to be impacted by funds.

Favorable factors:

1. The expectation of interest rate cut in the United States may lead to changes in the trend of commodity prices, but the impact of the expected time is limited.

2. At the end of the current period, the inventory of American cotton is still low, which does not rule out that future funds continue to hype the inventory.

Negative factors:

1. The planting intention of American cotton increased in the new year, and the total output of American cotton is expected to be higher than that of this year.

2. At present, the global economic recovery is average, and the consumption power may be insufficient.

3. The signing progress of American Cotton is average.

Domestic market outlook:

At present, the commercial inventory is still high and the total processing volume of new cotton is in the relative middle over the years. It is expected that the cotton supply will still be sufficient in April; From the demand side, the trend of low peak season this year is slightly obvious. At present, the sales progress of new cotton is still at a low level, the change of downstream order increment is not obvious, and there are signs of accumulated yarn stocks in some regions, leading to a certain pessimistic expectation of the market. It is expected that the trend rate of Zheng Mian will continue to maintain a slightly weak trend in April, However, the possibility of speculation surrounding the weather is not ruled out during the planting of new cotton in April.

Favorable factors:

1. In the new year, the large probability of domestic cotton planting area continues to decline.

2. April is the peak period of weather speculation, so it is possible to speculate on the weather in the planting area.

3. The current reserve stock is low, so the possibility of storage is not ruled out in the future.

Negative factors:

1. Commercial cotton stocks are high, and cotton supply in the domestic market continues to be loose.

2. At present, the progress of new cotton sales is slow.

3. The current peak season is not booming.

4. After the return of American cotton to its own fundamentals, the price trend may be empty, leading Zheng cotton to follow the weak trend.

1、 International market: The latest USDA global cotton production and sales forecast of this year shows that the global cotton production is basically stable, consumption is slightly increased, and there is no obvious contradiction in the global supply and demand structure.

According to the latest USDA global cotton supply, production and marketing forecast report, the total global cotton output in this year is basically finalized. In March, the total global cotton output was 24.593 million tons, 719000 tons less than that of last year; Compared with last year, the total consumption increased by 387000 tons to 2459100 tons.

1. United States: The supply of American cotton is tight this year. The surge of American cotton in the new year gives cotton planting certain advantages.

According to the latest USDA supply and demand report, the current US cotton output is about 2.63 million tons, which is at a low level over the years. However, as the new cotton planting season is approaching, the cotton grain ratio has increased significantly due to the upward trend of US cotton prices in the early stage, which is expected to stimulate the cotton supply in the new year. According to the American Agricultural Forum in February, the planting area of American cotton is expected to increase by 7.5% in the new year. If the cotton planting advantage continues to be maintained, the likely rate will lead to a larger than expected increase in the planting area. It is suggested to focus on the USDA and the new American cotton planting plan at the end of March.

The sales progress of American cotton in this year was average. According to USDA data, as of March 14, the cumulative contracted volume of American upland cotton in 2023/24 was 2.4285 million tons, and the contracted progress was 93%, 6 percentage points lower than the average value of five years. The cumulative shipment volume was 1.4435 million tons, and the shipment progress was 51%, 2 percentage points lower than the average value of five years.

The inventory at the end of the current period is low. According to the latest production and sales forecast data of USDA, the ending inventory of American cotton in March was about 544000 tons, 44000 tons less than that of the previous month. In combination with the data over the years, the current inventory is at a low position, which does not rule out the possibility that follow-up funds will continue to promote the inventory.

2. India: The production and sales of cotton in India increased this year, and the ending inventory continued to decrease.

According to the latest USDA production and sales forecast report in March, the total output of Indian cotton in 23/24 was increased by 109000 tons to 5.552 million tons, the consumption was increased by 65000 tons to 5.225 million tons, the export was increased by 87000 tons to 435000 tons compared with the previous month, and the ending inventory was increased by 44000 tons compared with the previous month.

According to the latest February supply and demand balance table released by the Indian Cotton Institute (CAI), India's cotton output is expected to be 5.265 million tons in 2023/24, an increase of 265000 tons month on month, or 5.3%; The import is expected to be 347000 tons, down 27000 tons month on month, or 7.3%; Consumption expectations rose by 102000 tons to 5.389 million tons, up 1.9% month on month; The export is expected to be 374000 tons, an increase of 136000 tons month on month, or 57.1%; India's cotton ending inventory is expected to remain unchanged at 340000 tons this year.

By the week of March 24, 2024, the weekly listing volume of Indian cotton was 52300 tons, down 15700 tons month on month; India's cumulative cotton market volume in 2023/24 is about 3066900 tons.

Since the middle of February, ICE cotton futures have broken 90 cents/pound and continued to be in the range of 90~100 cents/pound (the mid day high in February 28 reached 103.80 cents/pound, a new high in 17 months). In addition, some Indian institutions predict that the cotton planting area will decline or expand significantly in 2024, and the operating rate of Indian cotton mills will continue to be at a high level from December to February, India's domestic spot S-6, J34, MECH and other quotations were all strongly raised, moving the bargaining space up to 95~100 cents/pound (the transaction price of Gujarat S-6 in the first half of March was 60500-61000 rupees/Kandi). However, the surge in cotton seems to ignore the feeling, acceptance and digestion ability of the cotton mill. The cotton mill's ability to accept the price of cotton above 95 cents/pound is very limited. Some enterprises spinning cotton yarn of C32S and below count are now losing money in a large area. New orders are received in the short term, and business pressure continues to rise, so cotton procurement is significantly reduced or even postponed.

2、 Domestic market: the processing of new cotton is coming to an end, and the cotton supply is still loose this year; At present, the slow sales of new cotton and the performance of downstream orders generally lead to the further appearance of the weak trend in the peak season of "three gold and four silver".

1. The processing of new cotton is coming to an end, and the sales progress of new cotton is relatively poor.

According to the China Cotton Information Network, as of March 24, the cumulative processing volume of Xinjiang lint cotton was 5.5711 million tons. It is estimated that the estimated cotton output in Xinjiang this year will be about 5.6 million tons, which is more obvious than that of last year, and in the middle compared with that of the same period in previous years.

At present, the sales volume of new cotton is relatively slow. According to the data of the national cotton market monitoring system, as of March 21, 2024, the national cumulative sales of seed cotton will be 5.824 million tons of lint, which is 232000 tons less than the average of the past four years; The cumulative sales of lint were 2.852 million tons, 768000 tons less than the average of the past four years. At present, the national sales rate is 49%, down 9.3 percentage points year on year, 9.9 percentage points lower than the average of the past four years. According to historical data, although the sales volume of cotton has increased, it is still at a low level over the same period.

2. In February, cotton commercial inventory was at a high level, and cotton supply in the short-term market will continue to be sufficient.

According to the latest data from China Cotton Information Network, the commercial inventory of cotton nationwide in February was 5.3667 million tons, a month on month decrease of 20.03 million tons and a year-on-year increase of 77600 tons, including 4.0829 million tons in Xinjiang, 903.8 million tons in the mainland and 380 thousand tons in the bonded area. Compared with the data over the years, the current commercial inventory is still at a high level over the same period of the years, although it has decreased. On the basis of the current general performance of the demand side, the cotton inventory digestion is relatively slow, and it is expected that the cotton supply will continue to remain sufficient in April.

3. The cotton import volume in January and February was still high. Due to the rise of American cotton prices in the early stage, the cotton import volume in March may be reduced.

According to the latest data from the General Administration of Customs, the cumulative import from January to February 2024 is 640000 tons, an increase of 184% year on year and 420000 tons year on year; 23/24 The accumulative imports in 2014 were 1.73 million tons, an increase of 119% year on year, and 940000 tons year on year. Due to the high price of imported cotton caused by the surge of American cotton in the early stage, it is not ruled out that the cotton import volume will decrease in March. In addition, due to the strong trend of American cotton in February, the difference between internal and external prices of imported cotton was inverted. However, as the impact of capital promotion gradually weakened in early March, the price of American cotton fell, and the difference between internal and external prices narrowed, which was mainly due to the decline of American cotton prices.

4. The order performance in March was relatively flat, and the market showed some signs of the sluggish trend in the peak season of "three gold and four silver".

According to the data of China Cotton Information Network, as of the end of February, the cotton industrial inventory of textile enterprises in the same period was 890000 tons, 10000 tons less than that of last month, and 203800 tons more than that of the same period last year; The yarn inventory of textile enterprises in the same period was 18.68 days, up 3.34 days month on month and 0.13 days year on year; The grey fabric inventory in the same period was 27.24 days, an increase of 2.81 days month on month and a decrease of 7.52 days year on year. In March, the yarn inventory showed signs of accumulation, which was mainly due to the slow market shipment due to the performance of downstream order increment, and the market began to worry about the low peak season of "gold, three silver and four silver".

From the perspective of domestic sales, it is unlikely to turn around in the short term. From January to February, the retail sales of clothing, shoes and hats, knitwear and textiles were 252.1 billion yuan, a year-on-year decrease of 1%. Considering that many industrial enterprises, including cotton textile enterprises, are facing the dilemma of "increasing production is difficult to increase revenue", the core essence is overcapacity, while the effective demand is insufficient, In addition, many industrial enterprises, including cotton textile enterprises, will still control the pace of production and marketing against the background of weak demand, and reduce the purchase volume of raw materials. However, it is difficult for profits to continue to expand. From the perspective of export, textile exports in January performed fairly well, but exports in February declined slightly. According to the latest data from the General Administration of Customs, from January to February 2024, China's textile and clothing exports totaled US $45.096 billion, up 14.27% year on year. The textile export volume was 21.711 billion US dollars, up 15.5% year on year; The clothing export volume was 23.385 billion US dollars, up 13.1% year on year.

International market outlook: because the current cotton grain price ratio is at a high level, there is a certain optimistic expectation for American cotton planting. In addition, according to the USDA global planting forecast in mid February, the approximate rate of American cotton production in the new year will increase (it is recommended to focus on the USDA cotton planting forecast at the end of March); From the demand side, it is unlikely that the current global consumption will recover in the short term, and the contracting performance of American cotton generally makes the current basic level of American cotton relatively empty. It is expected that the trend of American cotton will be slightly weak in April, but it does not rule out the possibility that the inventory at the end of this year is at a relatively low level over the years and will continue to be impacted by funds.

Favorable factors:

1. The expectation of interest rate cut in the United States may lead to changes in the trend of commodity prices, but the impact of the expected time is limited.

2. At the end of the current period, the inventory of American cotton is still low, which does not rule out that future funds continue to hype the inventory.

Negative factors:

1. The planting intention of American cotton increased in the new year, and the total output of American cotton is expected to be higher than that of this year.

2. At present, the global economic recovery is average, and the consumption power may be insufficient.

3. The signing progress of American Cotton is average.

Domestic market outlook: the current commercial inventory is still high and the total processing volume of new cotton is in the relative middle over the years. It is expected that cotton supply will remain sufficient in April; From the demand side, the trend of low peak season this year is slightly obvious. At present, the sales progress of new cotton is still at a low level, the change of downstream order increment is not obvious, and there are signs of accumulated yarn stocks in some regions, leading to a certain pessimistic expectation of the market. It is expected that the trend rate of Zheng Mian will continue to maintain a slightly weak trend in April, However, the possibility of speculation surrounding the weather is not ruled out during the planting of new cotton in April.

Favorable factors:

1. In the new year, the large probability of domestic cotton planting area continues to decline.

2. April is the peak period of weather speculation, so it is possible to speculate on the weather in the planting area.

3. The current reserve stock is low, so the possibility of storage is not ruled out in the future.

Negative factors:

1. Commercial cotton stocks are high, and cotton supply in the domestic market continues to be loose.

2. At present, the progress of new cotton sales is slow.

3. The current peak season is not booming.

4. After the return of American cotton to its own fundamentals, the price trend may be empty, leading Zheng cotton to follow the weak trend.