Market Observation: The Contradiction Between Supply And Demand In 2025 Global Cotton Market Is Still Prominent

In January, the contradiction between supply and demand in the global cotton market was still prominent. The impact of domestic new cotton yield expectations on cotton prices was diminishing marginally, and the market focus was tilted to the policy game after the change of the US president.

According to the prediction of the U.S. Department of Agriculture in January, the global cotton output in 2024/25 will be 26.01 million tons, with a year-on-year increase of 1.41 million tons and a month on month increase of 450000 tons; The global cotton consumption was 25.23 million tons, an increase of 340000 tons year on year and an increase of 20000 tons month on month; Production exceeded demand by 770000 tons, an increase of 430000 tons month on month; The global cotton inventory consumption ratio was 67.23%, up 2.36 percentage points over the previous year.

The global cotton export supply is mainly American cotton and Brazilian cotton. In 2024/25, the weekly contracted export volume of American cotton will be around 40000 tons, and in the second week of January, the contracted export volume will rise to 72000 tons, but it does not support the ICE cotton price; As of January 9, the cumulative shipment volume of American cotton was 740000 tons, a year-on-year decrease of 143000 tons, accounting for 30.9% of the export volume predicted by the U.S. Department of Agriculture. The export shipment of Australian cotton ended, and the focus turned to the planting of new cotton. From August to December, Brazilian cotton exports totaled 1.215 million tons, an increase of 94000 tons year-on-year, accounting for 43.6% of the predicted export volume. 　

At present, the domestic new cotton production increase is expected to be realized, and the impact on the recent cotton price is marginal weakened. The downward trend of consumption in the downstream market has not improved. The support of the domestic demand expansion policy remains to be further observed. The external demand may decline after the stage of activity. The fundamentals of loose supply and demand are not enough to support cotton prices. In the short term, it is expected that changes in the macro environment will have a stronger role in boosting cotton prices, and the probability of cotton prices being stronger will increase.

First, from the current situation, Trump's tariff speech has weakened its deterrent on cotton prices. The market expects that the 10% tariff increase will be more moderate than the 60% range previously stated. Exporters believe that it is still within the affordable range, which partially alleviates market tension.

Second, from the domestic situation, historical data show that the first quarter is often the key node for China to achieve a good start to the whole year's economy, and the market hopes that a new round of domestic policies will be introduced and implemented intensively after the festival, or provide a certain upward momentum for domestic cotton prices.