Market Analysis: The Market Forecast For The Growth Of Cotton High-Yield Inventory Is Not Optimistic

In the first half of December, the spot price of domestic cotton fell below the previous shock range and went down. In the middle of December, the spot price of cotton kept hitting new lows, and fell to the lowest price of 13935 yuan/ton in 2024 on December 20, down 2920 yuan/ton from the highest price of 16855 yuan/ton in February, a decline of 17.32%.

The main driving factors causing the cotton price to fall again are the pattern of strong supply and weak demand in the domestic cotton market and the negative USDA global cotton supply and demand data in December. However, after the cotton price continued to fall, the ginning plant's losses expanded. After the cotton price fell to the low point in August September, the cost supporting role was strengthened, and the cotton price rebounded from the low point in late December. With the Spring Festival approaching, can the stock market before the Spring Festival, as in previous years, start as scheduled, will demand improve periodically, and will cotton prices rise seasonally? Specific analysis:

As the global cotton production increases while the consumption growth is limited, the global cotton market presents a pattern of loose supply and demand. Judging from the USDA global cotton supply and demand data in December, the global cotton ending inventory in 2024/2025 will increase by 404000 tons year-on-year to 16551000 tons; The output increased by 959000 tons to 25558000 tons year on year; Consumption increased by 319000 tons to 25211000 tons year on year; The ending inventory increased by 404000 tons to 16551000 tons year on year.

The cotton yield is expected to increase. The cotton harvest in 2024 is faster than that in the same period last year. As of December 23, 2024, the total cumulative processing volume of lint in Xinjiang is 5.63 million tons, a year-on-year increase of 20%; The public inspection volume of cotton in Xinjiang reached 5.2189 million tons, with a year-on-year increase of 16.9%. At present, the daily processing volume is maintained at more than 40000 tons, and the cotton production is expected to be strong. Zhuochuang Information estimates that the national cotton output in 2024/25 is expected to reach 6.32 million tons, an increase of 605000 tons or 10.59% year on year. In 2024/25, the domestic cotton carry over inventory is relatively high, and the commercial inventory of cotton continues to rise due to the concentrated impact of the new cotton listing. By the end of November, the national commercial inventory of cotton was 5.7907 million tons, an increase of 57.99% month on month and 25.86% year on year. Expectations of high yield of cotton increased, and supply pressure was significant, which was bad for cotton prices.

December was in the slack season of the cotton textile market, and cotton textile enterprises had few orders. In order to cope with the accumulation of finished product inventory, textile enterprises reduced production load. In addition, new cotton is concentrated on the market, and the market resource supply is sufficient. Downstream textile enterprises and traders are not very enthusiastic about purchasing. Textile enterprises maintain small order purchase in just need. Trading enterprises also focus on short-term operations, and the sales progress of new cotton is slow. As the Spring Festival holiday approaches, some enterprises begin to stock up before the Spring Festival, but after Trump wins the election, the pressure on the export of end products has increased. In order to cope with the possible market uncertainty in the first half of 2025, textile enterprises have to adopt the strategy of reducing raw material inventory and accelerating product sales. Therefore, at present, downstream enterprises are quite cautious in stocking up before the festival, and some textile enterprises plan to take a holiday in advance, The demand for lint is limited, so it is difficult to have a significant increase in cotton transactions before the Spring Festival, and probably there will not be a large stock market in the downstream.

To sum up, the cotton price in December has fallen to the previous low hit from August to September. Without new negative impact, it is more difficult for the cotton price to continue to fall. In addition, the lint cost is inversely linked to the market price, and the cost also has some support for the price. However, the export of terminal textiles and clothing is facing greater uncertainty, and the prospect of cotton demand is not optimistic, which leads to insufficient enthusiasm for stocking up before the festival. The demand side is difficult to improve significantly, and the global supply pressure is large, so it is difficult for cotton prices to rise significantly before the Spring Festival, or maintain a volatile trend.