Market Observation: Cotton Has Experienced Fluctuations In The Past Two Years. The New Season, From Planting To Climate Change, Has Affected Industrial Development

After experiencing significant fluctuations in the past two years, the cotton market volatility has generally declined this year, which is reflected in the lack of large contradictions between macro and fundamental aspects in the global cotton market. In addition, unlike other bulk commodities, domestic cotton prices fluctuated more than overseas cotton markets this year, which also led to the transformation of cotton imports from losses to import profits.

In terms of the international cotton market, cotton harvesting in most countries in the northern hemisphere has been basically completed, and cotton production in the northern hemisphere has gradually become clear. What is the impact on the future market of cotton prices? Liu Qiannan, cotton analyst of Galaxy Futures, believes that there is not much room for change in the later period. This year, the global cotton output has declined due to El Nino phenomenon and other reasons, among which the output of China, the United States, Turkey, India and other major producers has declined significantly. In terms of consumption, the global epidemic led to a downturn in consumption last year. After the epidemic ended this year, consumption recovered periodically, and consumption in several major cotton consuming countries increased by varying degrees. In this year, the global cotton output was 24.7 million tons, the global cotton consumption was 25.1 million tons, and the global cotton ending inventory was 17.74 million tons. Both the output, consumption and ending inventory were in the middle position. Since there is no particularly obvious contradiction between supply and demand of global cotton, the global cotton price fluctuates in the middle range. In 2023, the US cotton price of the global cotton price vane will basically fluctuate between 70-90 cents/pound.

It is noted that, from the perspective of supply and demand, the international cotton inventory consumption ratio declined year on year, but the margin (month on month) rose. According to the November report of USDA, global consumption in 2023/24 will decline month on month, and production and inventory will increase.

In terms of output, the estimated output of the United States, Argentina, Paraguay and other countries increased, offsetting the decline in Spain and Mexico. In terms of consumption, the consumption of the United States, Vietnam, Turkey and other countries also declined. It can be seen that under the background of interest rate hikes in major international economies, textile and clothing consumption is still affected to some extent, and ultimately transmitted to cotton consumption and carry over inventory.

Judging from the export data of American cotton, it also verifies that the consumer side is weak. For China, according to the statistics of the General Administration of Customs, China imported 290000 tons of cotton in October 2023, an increase of about 50000 tons month on month, or 22.1% year on year; From January to October, China imported 1.38 million tons of cotton, down 23.6% year on year; In 2023/24, China imported about 530000 tons of cotton, with a year-on-year growth of about 140.9%. Due to the opening of the import profit window in the early stage, the increase of cotton imports has also formed certain pressure on the domestic market.

In terms of exports, China's textile and clothing exports in October reached US $22.966 billion, down 8.23% year on year, the sixth consecutive month of decline, 12.33% month on month, and the year-on-year and month on month declines were larger than those in September. From January to October, China's textile and clothing exports reached 245.718 billion US dollars, down 9.22% year on year. In October, the year-on-year and month on month declines in China's textile and clothing exports expanded.

Compared with the global cotton supply and demand in previous years, the main cotton producing countries have changed. Brazil's cotton output is growing, and Australia's cotton output has also increased significantly compared with previous years, which has an increasing impact on the market. India's impact on the market is also becoming less and less as its export volume decreases., According to USDA data, the total global cotton output in this year is expected to be 24.7 million tons, a decrease of nearly 700000 tons compared with the previous year, including 810000 tons of cotton output in China, 300000 tons of cotton output in the United States, 2850000 tons of cotton output in India, 280000 tons of cotton output in India, and 5.44 million tons of cotton output in Pakistan, Brazil's cotton output increased by 620000 tons to 3.17 million tons. The global cotton consumption in this year increased by 950000 tons to 25.1 million tons compared with the previous year, of which the cotton consumption in Pakistan increased by 280000 tons to 2.18 million tons, and the cotton consumption in India, Bangladesh, Turkey and other countries increased slightly.

As for the future market of cotton, the current inventory of cotton industry is on the high side, and the "golden nine and silver ten" has been falsified. The continued dumping and stockpiling of new cotton will have a short-term impact on the market after its listing. Pay attention to the downstream orders and macro policy changes in the later period. In the long run, cotton prices will fluctuate in a large range. Considering that the absolute price of cotton is low at present and the downstream is gradually destocking, consumption is expected to recover in the future, and the bargain hunting cotton purchase contract still has investment value under the expected replenishment of the new year's round of cotton storage.

From the perspective of the international market, the contradiction between the cotton supply and demand market is not serious this year, and the short-term market may still maintain an interval oscillation trend. However, as the El Ni ñ o phenomenon continues, there are still uncertain factors in the cotton yield of the southern hemisphere in the later period, which may even have an impact on the global cotton yield in the next year. At the consumer end, the global economic situation next year is not optimistic, and the global economic growth is under pressure. Both sides of supply and demand may decline in the new year, but it is expected that factors such as weather and output will dominate the market before and at the beginning of planting new crops next year.

From the perspective of the domestic market, weak demand dominates the market trend. At present, the cotton yarn inventory is large, and the downstream consumption power is insufficient. Most enterprises choose to purchase on demand, and the orders are mainly loose orders and small orders. New cotton is coming into the market. The supply side of the market is sufficient, and the demand side is weak, especially the export side. In the short term, it is expected that the cotton price will still maintain a slightly weak trend of oscillation. However, considering that the current cotton price is at a slightly lower middle level, and the cotton production in Xinjiang is seriously reduced this year, it is expected that there is little room for further downward movement. By March and April next year, it is expected that the cotton price will reach the bottom as Xinjiang's cotton output becomes clearer and cotton destocking becomes increasingly obvious.