Quote Today: Cotton Market 1 Fell Below The Low Point Of 4340 Yuan/Ton This Year

Since June, due to strong global cotton production expectations and weak demand for textiles and clothing, market confidence has been depressed, and cotton prices at home and abroad have fallen below previous lows. On June 17, the main contract of ICE cotton hit 70 cents/pound, the lowest point in three and a half years. On June 18, the main contract price of Zheng cotton hit 14340 yuan/ton, the lowest point of this year.

As of June 21, the settlement price of the main contract of ICE cotton was 72.21 cents/pound, down 4.17 cents/pound month on month, or 5.5%; The international cotton index (M) representing the average landed price of imported cotton in China's main port was 80.84 cents/pound, down 1.86 cents/pound month on month, which converted into RMB import cost of 13940 yuan/ton (1% tariff, excluding port fees), down 316 yuan/ton month on month, or 2.2%. The settlement price of the main contract of cotton futures in Zhengzhou Commodity Exchange was 14525 yuan/ton, down 780 yuan/ton month on month, or 5.1%; The national cotton price B index, representing the market price of standard lint in the mainland, was 15717 yuan/ton, down 602 yuan/ton month on month, or 3.7%.

　　 Analysis and Prospect

International cotton market

（1） The weather change in July August will be the focus of the market

Since June, the weather in major cotton producing countries has been favorable for cotton growth. According to the statistics of the U.S. Department of Agriculture, as of June 16, the seeding progress of American cotton was 90%, 3 percentage points higher than that of the previous year; The budding rate of cotton was 22%, 8 percentage points higher than that of the previous year; 54% of cotton grew well, up 7 percentage points year on year, and the proportion of good seedlings of American cotton in the past two weeks decreased slightly compared with the previous period. The cotton picking in Brazil has started. As of June 9, the cotton picking rate in Brazil was 1.7%, up 0.8 percentage points year on year. According to the forecast of Conab, Brazil's cotton output is 3.6571 million tons, an increase of 15.2% year on year. According to the June supply and demand forecast of the US Department of Agriculture, the global cotton output in 2024/25 will be 25.94 million tons, an increase of 1.17 million tons year on year, 20000 tons more than the forecast in May; The cotton consumption was 25.46 million tons, an increase of 840000 tons year on year and 18000 tons more than the forecast in May.

July August is the most critical growth period for cotton in the northern hemisphere, and weather changes and their impact on yield will be the focus of the market. According to the forecast of the National Hurricane Center of the United States, two tropical cyclones are being generated along the southeastern coast of the United States and the Gulf of Mexico. Rainfall will occur in the southeast and Texas in the future, and the local drought will be improved. The weather forecast released by the Indian Meteorological Department shows that the monsoon rains are coming, and the high temperature weather in northern India will be relieved from next week. It should be noted that if the rainfall lasts too long, it will also have a negative impact on cotton growth, especially the occurrence of diseases and pests.

　 （2） Loosening monetary tightening policies in some developed economies will help restore cotton demand

Since this year, the monetary tightening policy of the European Central Bank and some western developed economies has eased: the Swiss Central Bank cut interest rates by 50 basis points twice in March and June, while the Swedish Central Bank cut the benchmark interest rate by 25 basis points in May, the Bank of Canada and the European Central Bank in June. Although the United States is still adhering to the monetary tightening policy, the above situation has led to the market's expectation that the Federal Reserve will cut interest rates at least once this year. The interest rate cut will help reduce the borrowing pressure on enterprises and residents, and promote the gradual recovery of consumer demand. The International Textile Manufacturers Federation (ITMF) global textile industry survey in May showed that the operating situation of the global textile industry improved slightly. The number of unproductive orders of enterprises rose slightly from 1.9 months in March to 2.1 months in May, and the expectation of orders in the next six months showed an upward trend.

　　 （3） The progress of cotton export accelerated year on year, and the margin of textile and clothing import market improved

Although the high international cotton price from February to April this year depressed the importer's purchase demand, from the overall situation of international cotton trade in 2023/24, the cotton export progress of the major exporting countries did not slow down. According to the customs data of the United States, Brazil, Australia and India, from August 2023 to April 2024, the export of American cotton will be 2.028 million tons, a year-on-year decrease of 27000 tons; Brazil exported 2.124 million tons of cotton, with a year-on-year increase of 868000 tons; Australia exported 901000 tons of cotton, a year-on-year decrease of 84000 tons; India exported 409000 tons of cotton, an increase of 242000 tons year on year. The four countries' cotton exports totaled 5.462 million tons. According to the annual export volume (7.011 million tons) estimated by the U.S. Department of Agriculture, the total cotton export progress of the four countries is 77.9%, 1.1 percentage points higher than that of the previous year.

Against the background of declining inflation rates in some major economies in the United States and Europe, and signs of improvement in the macro-economy and consumer markets, the year-on-year decline in textile and clothing imports in the United States and the European Union continues to narrow. According to EU customs data, EU textile and clothing imports from January to April 2024 were US $9.29 billion, US $9.48 billion, US $10.3 billion and US $10.4 billion, up 19.7%, - 7.3%, - 7% and 13.1% year on year. According to US customs data, the US textile and clothing imports from January to April 2024 were US $8.59 billion, US $8.68 billion, US $8.56 billion and US $8.33 billion respectively, with year-on-year growth of - 12.7%, 4.8%, - 0.9% and 1%. According to the Census Bureau of the U.S. Department of Commerce, the sales of clothing and accessories stores in the United States in May reached 26 billion dollars, up 2.44% year on year and 0.9% month on month.

　 Domestic cotton market

（1） The weather in the main cotton production area is fine, and the impact of high temperature in the later period is concerned

Since the spring sowing this year, the climate conditions in the main cotton regions across the country have been more favorable for cotton growth. Most regions in Xinjiang have sunny weather, and the temperature is generally in the appropriate range for cotton growth. Cotton is growing fast, and most regions have entered the bud stage. Since May, occasional gales and hail weather have interfered with cotton growth in Xinjiang. However, due to limited disaster areas, the expected impact on new cotton yield is not significant. According to the research of the national cotton market monitoring system, as the cotton growth in Xinjiang this year is significantly better than that in the same period last year, many cotton farmers and industry insiders predict that the cotton yield will have some room for improvement.

Continuous high temperature and severe convection weather are likely to occur in July August in summer. Due to the high temperature on a year-on-year basis this year, some cotton fields suffer from less diseases and pests. Cotton farmers timely drip irrigation and spray pesticides to control the spread of diseases and pests. At the same time, they are worried that if the continuous high temperature in the later period will test cotton growth. According to the early warning of Xinjiang Meteorological Department, the high temperature weather of more than 35 degrees will appear in most plain areas of Xinjiang from late June to early July. Attention should be paid to whether the high temperature and severe convection weather in Xinjiang this year will have adverse effects on cotton growth.

　　 （2） The current textile market demand is poor, and may improve in the later period

Since June, the domestic textile market has had a strong off-season atmosphere. According to the research conducted by the National Cotton Market Monitoring System in Shandong and Jiangsu, textile mills reflect that the trend of production restriction or production conversion is becoming more and more obvious. The lack of new orders, the increase of yarn stock accumulation rate and the increase of cash flow pressure lead to a weak willingness to purchase raw cotton to replenish the stock. The operating rate of weaving mills in Guangdong, Jiangsu and Zhejiang has been falling, and the production and operation pressure of cotton mills has increased. 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, and the yarn and cloth inventory increased month on month.

According to the analysis of the historical changes of China's textile and clothing exports and spinning output, the second half of the year is generally better than the first half. In the past 10 years, the average annual export volume of textiles and clothing in the second half of the year was 22.04 billion US dollars higher than that in the first half of the year, 17.1% higher than that in the first half of the year; The average spinning output in the second half of each year is 1.686 million tons higher than that in the first half of the year, 10.6% higher than that in the first half of the year. According to the above situation, it is speculated that the textile market demand may improve in the later period.

　 （3） The cotton supply is still sufficient, and the sales pressure is increasing day by day

According to the survey data of 154 cotton delivery and supervision warehouses in 18 provinces and cities of the national cotton trading market conducted by the Cotton Logistics Branch of the China Cotton Association, the total cotton turnover inventory in China was about 3.7741 million tons by the end of May, a month on month decrease of 561800 tons, an increase of 281300 tons over the same period last year. The national cotton market monitoring system predicts that China's cotton consumption in 2023/24 will be 8 million tons, that is, the average monthly consumption will be 670000 tons. According to this figure, China's cotton consumption demand from June to August was 2.01 million tons, and the current cotton turnover inventory is enough to meet this demand. In addition, according to the situation in previous years, the Agricultural Development Bank of China generally requires loans to "double zero" before the end of August. At present, the sales pressure of enterprises that still have cotton in stock will increase day by day.

This month, the national cotton market monitoring system increased the cotton import volume by 450000 tons to 3.1 million tons in 2023/24, decreased the cotton consumption by 100000 tons to 7.9 million tons, and increased the inventory at the end of 2023/24 and the beginning of 2024/25 by 550000 tons to 6.79 million tons. It is predicted that China's cotton output in 2024/25 will be 5.7 million tons, a year-on-year decrease of 200000 tons; The cotton consumption was 8.1 million tons, an increase of 200000 tons year on year; The import volume was 2.4 million tons, a year-on-year decrease of 0.7 million tons; The export volume was 30000 tons, with a year-on-year increase of 10000 tons; The ending inventory was 6.76 million tons, a year-on-year decrease of 30000 tons; The inventory consumption ratio at the end of the period was 83.15%, a year-on-year decrease of 2.58 percentage points (see Table 2 for details).