The Latest Cotton Supply And Demand Report Released By USDA Shows That

The global cotton supply surplus, combined with the centralized listing of new cotton in the northern hemisphere, has put pressure on cotton prices. The latest cotton supply and demand report released by USDA shows that the global cotton production, consumption, trade volume and ending inventory will increase month on month in 2024/2025.

The report shows that the total global cotton output in 2024/2025 is expected to be 26007000 tons, an increase of 449000 tons month on month, or 1.8%; The global cotton consumption is expected to be 25.233 million tons, an increase of 22000 tons month on month, or 0.1%; The global cotton ending inventory was 16.963 million tons, an increase of 412000 tons month on month, or 2.5%. According to this forecast, the global cotton production surplus is about 774000 tons. At the same time, since this year, the northern hemisphere has basically completed the listing of new cotton, and the supply pressure of new cotton in 2024/2025 has reached the peak. The global cotton supply and demand pattern has also changed from the shortage of demand in the previous year to the oversupply of demand. The loose global cotton supply also puts pressure on cotton prices in 2024/2025.

In terms of American cotton, the export progress of American cotton in 2024/2025 is lower than the average level in recent five years. According to the data of the U.S. Department of Agriculture, as of January 9, 2025, the cumulative net contracted export of cotton in the United States in 2024/2025 was 1.887 million tons, reaching 78.77% of the annual expected export volume, 4% behind the average contracted progress in the past five years. The main reason is that China lacks purchasing power. In terms of quotas, although the price difference between internal and external cotton within the quota in 2024 will be inverted, and the imported cotton will have certain price advantages, the sliding tariff import quota in 2024 will only increase 200000 tons, and all of them will be imported through non-state-owned, processing limited trade, which is significantly lower than the market expectation, which will directly lead textile enterprises to reduce the inquiry and purchase of foreign cotton.

According to the data of the US Department of Agriculture, as of January 9, 2025, China has signed up to import 161000 tons of US cotton in 2024/2025, accounting for 8.52% of the contracted volume of US cotton, far behind the level of previous years. Although the total contracting volume of Pakistan, Vietnam, Turkey, India and Thailand has increased significantly year on year, it is still difficult to offset the gap, and China's cotton import structure has changed. Brazilian cotton has become the main import cotton of China. Although the 1% quota import tariff has been lowered in the new year, the impact on the promotion of American cotton exports has weakened, Overlapping Trump's expectation of increasing tariffs, the dependence of US textile terminal consumption on China has declined, which further reduces China's enthusiasm for importing foreign cotton, thus dragging down China's contracted volume of US cotton.

Domestically, the price of Zheng Mian futures has risen since late December 2024.

The impact of new cotton yield expectation on the panel is marginal diminishing. According to the data of the national cotton trading market, as of January 17, 2025, the total lint processing volume in Xinjiang has reached 6.3325 million tons, a year-on-year increase of 19.16%. According to the prediction of various mainstream organizations, the domestic output of new cotton is expected to exceed 6.5 million tons, and the high yield of new cotton has become the consensus of the market; The purchase of new cotton in 2024/2025 is in rapid progress, and the supply pressure of new cotton is ahead of schedule. The decline in the early stage also further digested the impact of high yield. In December last year, China's textile and clothing export data was good, and the policy side worked hard to stimulate domestic demand, which is also the reason why Zheng Mian's recent trend rebounded and deviated from the trend of foreign cotton.

There were two main reasons for the rise of domestic cotton prices in late December last year. First, as the January contract entered the delivery month, the futures and spot prices got closer. Therefore, the rise of January contract was significantly higher than that of other months, which also strengthened the prices of other contracts; Second, after the last ten days of December, the order receiving situation of some enterprises has slightly improved compared with the previous period. Although the profit is low, the production can basically be maintained until the end of February. At the same time, under the effect of a small amount of replenishment just before the festival, the cotton inventory pressure of textile enterprises decreased. Therefore, Zheng Mian futures rose in shock.

Looking forward to the future, in terms of fundamentals, as cotton subsidies in Xinjiang maintain the stability of cotton planting income, it is expected that the cotton planting area in Xinjiang will be difficult to reduce in 2025, and there is a possibility of flat or small growth. On the demand side, depending on the policy strength, cotton just needs to exist, but the increment is limited. Terminal consumption may improve, but the increment may be more from non cotton products. In general, the reality of strong cotton supply is intertwined with the weak expectation of domestic demand recovery, and the cotton price at the current stage is at a low or medium level, which limits the space at the bottom of the future price. It is expected that the cotton price will maintain wide fluctuations in 2025.

At present, the processing of new cotton has basically come to an end, and the output is gradually clear. At present, the focus of the market has gradually shifted to the planting intention of 2025/2026. The planting intention of the new year in China shows signs of year-on-year increase, which is a new potential pressure point for cotton prices. China's economic data last month showed strong economic resilience, and the macro environment showed signs of warming. In terms of American cotton, although the latest export report shows that the contract signing of upland cotton has greatly increased month on month, and the shipment has hit a new annual high, the absolute contract signing volume still shows an expanding trend, so there is still room for the export target of American cotton to be lowered in the later period. Investors should focus on China's signing of contracts in the later stage, which will have an important impact on American cotton exports.