ICE Cotton Futures Cotton Prices Continue To Be Weak, Running At A New Low For Three And A Half Years

Last week, cotton prices at home and abroad continued to run weak. The main contract price of ICE cotton futures hit a three-and-a-half year low of 70 cents/pound on Monday. The main contract price of Zheng Mian hit an annual low of 14340 yuan/ton on Tuesday, and then rebounded slightly. From June 17 to 21, the average settlement price of the main contract of Zhengzhou cotton futures was 14543 yuan/ton, down 367 yuan/ton from the previous week, or 2.5%; The national cotton price B index, which represents the market price of standard lint in the mainland, averaged 15858 yuan/ton, down 300 yuan/ton or 1.9% from the previous week.

The average settlement price of the main contract of cotton futures in New York was 72.34 cents/pound, up 0.42 cents/pound from the previous week, or 0.6%; The international cotton index (M), which represents the average landed price of imported cotton at China's main port, is 80.54 cents/pound, up 1.25 cents/pound from the previous week, or 13888 yuan/ton (calculated at 1% tariff, excluding port sundries and freight), up 216 yuan/ton or 1.6% from the previous week. The domestic cotton price is 1970 yuan/ton higher than the international cotton price, 516 yuan/ton lower than last week.

The average price of domestic C32 combed pure cotton yarn is 22345 yuan/ton, 165 yuan/ton lower than the previous week. The average price of conventional outer yarn is 22276 yuan/ton, 66 yuan/ton lower than the previous week, 69 yuan/ton lower than that of domestic yarn.

Recent market situation outlook

（1） International market

In the near future, the weather in major cotton producing countries is basically normal, and the yield increase is expected to remain unchanged. The US Department of Agriculture's cotton production report showed that as of June 16, the US cotton planting rate was 90%, up 3 percentage points year on year; The budding rate was 22%, up 8% year on year; The growth rate was 54%, up 7 percentage points year on year. According to the report of the Brazilian Cotton Farmers Association, the Brazilian cotton harvest has started at present, and the harvest progress is 1.34%. The cotton output in 2023/24 is predicted to be 3.5 million tons, with a year-on-year growth of 7.7%. It should be noted that with the arrival of summer, severe convection weather will gradually increase, and the impact on cotton growth needs to be observed.

Recently, the Indian government announced to raise the minimum support price (MSP) of cotton in 2024/25, and the minimum purchase price of medium staple cotton was raised from 6620 rupees/public load to 7121 rupees/public load, an increase of 7.6%. This will lead to an increase in the production cost of Indian lint and an increase in export pressure, which may increase the demand of Indian cotton mills for internationally low-cost imported cotton. In addition, with the decline of international cotton prices, international cotton procurement demand has rebounded, and the US cotton export contracts and shipments have increased for two consecutive weeks. If the demand for international procurement can continue to increase steadily, it may provide support for cotton prices.

（2） Domestic market

The domestic cotton market maintains the situation of strong supply and weak demand. According to customs data, in May, China imported 260000 tons of cotton, a 1.4 times increase over the same period last year. Imported cotton maintained a high supply. According to the survey of the national cotton market monitoring system, as of June 15, the port had about 490000 tons of cotton outside customs clearance. Xinjiang cotton entered the full bud period, and local cotton fields in Wusu, northern Xinjiang suffered hail weather, but the overall affected area was relatively small. Cotton in most areas grew well, and it was expected to maintain high yield of new cotton.

The characteristics of the downstream textile market in the off-season are strengthened, and the enterprises are short of orders. According to the survey of the national cotton market monitoring system, at the beginning of June, the start-up rate of the sampled enterprises was 71.4%, down 7.2 percentage points month on month. The inventory of yarn and cloth increased month on month, reflecting the weakening of market liquidity. However, with the recent rapid decline in cotton futures prices, spot sales of Xinjiang processing enterprises have accelerated, yarn prices have declined less than cotton prices, and the spot profits of textile enterprises have improved. On the whole, the situation of strong supply and weak demand will continue, and cotton prices will remain under pressure in the short term. At the same time, considering the slight recovery of spot demand, it is expected that the space for cotton prices to continue to fall is relatively limited.