In June, the Federal Reserve’s interest rate hike triggered concerns about economic recession, commodity market prices fell sharply, and domestic and foreign cotton futures and spot prices also fell rapidly. Affected by factors such as the U.S. Xinjiang-related bill taking effect and the textile industry being in the traditional off-season, domestic textile companies have insufficient new orders, downstream consumption is weak, and lint procurement is cautious. The pressure on cotton companies to repay their loans is increasing day by day, and they are constantly lowering their sales quotations. Domestic cotton prices have been under pressure and have declined weakly, hitting a new low this year at the end of the month. During the same period, international cotton prices fell back from highs, but the decline was smaller than domestic prices, and the price gap between domestic and foreign cotton continued to expand.
By the end of June, the meteorological conditions in cotton areas across the country were generally conducive to cotton growth, and seedling growth was better than last year. Compared with 2021, the national average cotton yield trend is a year of increased production. According to a survey by the China Cotton Association, the total national cotton output in 2022/23 is expected to be approximately 5.86 million tons, a year-on-year increase of 1.5%.
The China Cotton Association estimates that cotton consumption in 2021/22 will be 7.3 million tons, a year-on-year decrease of 13.36%. As the recent textile market is still weak, consumption is reduced by 200,000 tons from the previous period; import volume is still 1.7 million tons, a year-on-year decrease of 38%; The export volume was 20,000 tons; the ending inventory was adjusted accordingly to 8.3 million tons, a year-on-year increase of 1.89%; the total national cotton output was still 5.774 million tons.
1. It is expected that the total cotton output in the country will increase in 2022
In June, according to a survey by the China Cotton Association, the national cotton planting area in 2022/23 was 43.467 million acres, basically the same year-on-year. The yield per unit area is expected to increase slightly year-on-year, with the total output being approximately 5.86 million tons, a year-on-year increase of 1.5%. By the end of June, the national cotton budding rate was 97.8%, 0.5 percentage points higher than the same period last year. The degree of occurrence of diseases and insect pests is relatively mild. Among them, 82.9% of the area has relatively mild disease, which is 42 percentage points higher than the same period last year. 55.0% of the area has relatively mild insect damage, which is 8.2 percentage points lower than the same period last year. 51.1% of surveyed households reported that the overall growth of cotton is good. A year-on-year increase of 31.7 percentage points. Since June, Xinjiang has mostly sunny weather, with higher temperatures and sufficient sunshine, which is generally suitable for cotton growth. Yield per unit area is expected to increase slightly, with total output reaching approximately 5.394 million tons, a year-on-year increase of 2.3%, accounting for 92% of the country’s total output.
2. Domestic cotton prices fell sharply
In June, the Federal Reserve’s interest rate hike triggered concerns about economic recession, commodity market prices fell sharply, and domestic and foreign cotton futures and spot prices also fell rapidly. China’s imported cotton price index FCIndexM averaged 154.95 cents/lb, down 6.79 cents from the previous month; at the end of the month, it was 143.12 cents/lb, down 12.86 cents from the previous month. The 1% tariff discounted RMB 23,619/ton, which was higher than domestically during the same period. The spot price is 5,250 yuan, and the price difference between domestic and foreign cotton prices continues to expand significantly. At the same time, affected by factors such as the entry into force of the U.S. Xinjiang-related bill, domestic textile companies have insufficient new orders and downstream consumption is weak. Cotton companies are under increasing pressure to repay loans. Domestic cotton prices have been under pressure and have declined weakly, hitting a new low this year at the end of the month. The sales of blended products converted by some textile enterprises were slightly better. Due to the short-term supply shortage of raw materials, the prices of polyester staple fiber and viscose staple fiber increased steadily. On June 30, China’s cotton price index (CCIndex3128B) was 18,369 yuan/ton, a month-on-month decrease of 3,150 yuan; the monthly average price was 20,402 yuan/ton, a month-on-month decrease of 1,720 yuan.
3. Commercial inventories declined slightly
Domestic cotton prices have fallen weakly, and cotton companies have increased sales pressure. Due to the continued off-season, textile companies have weak downstream demand and high pressure on finished product inventories. Coupled with the fall in cotton prices, they are more cautious in purchasing lint cotton. The total national cotton commercial inventory at the end of June About 3.7222 million tons, a decrease of 440,600 tons or 10.58% from the previous month, which was higher than the 704,900 tons in the same period last year. Xinjiang’s cotton resources are still relatively abundant. The Xinjiang cotton professional warehouse shipped 300,000 tons out of Xinjiang, a month-on-month decrease of 22,500 tons and lower than the 39,500 tons in the same period last year.
4. Textile output decreased month-on-month
Domestic textile fundamentals remained weak in June. The traditional off-season was coupled with the impact of the U.S. Xinjiang-related bill taking effect. Downstream orders were insufficient, and the operating rate of textile companies continued to decline. After the cotton price plummeted in late June, spinning profits have recovered, some textile companies have restarted operations, and the overall operating rate has rebounded. According to the survey, yarn output fell by 5.6% month-on-month and 12.8% year-on-year; cloth output fell by 6.7% month-on-month and 14.3% year-on-year. As of June 30, the cotton industry inventory of textile companies in the warehouse was 579,100 tons, a decrease of 11,000 tons from the end of last month and a year-on-year decrease of 265,500 tons.
Domestic textile and clothing exports have increased significantly. Data from the General Administration of Customs show that in June 2022, my country’s exports of textiles and clothing were US$31.55 billion, a year-on-year increase of 14.03%, and a month-on-month increase of 7.93%. Among them, exports of textile yarns, fabrics and products were US$13.51 billion, a year-on-year increase of 7.93%. An increase of 7.9%, a month-on-month decrease of 3.73%; exports of clothing and clothing accessories were US$18.04 billion, a year-on-year increase of 19.1%, and a month-on-month increase of 18.7%. From January to May 2022, my country’s total textile and apparel exports were US$156.49 billion, a year-on-year increase of 11.66%, of which textile exports were US$76.32 billion, an increase of 11.3%; clothing exports were US$80.17 billion, an increase of 12%.
Data released by the National Bureau of Statistics showed that the economy stabilized and rebounded in June. In the first half of the year, total retail sales of consumer goods fell by 0.7% year-on-year. However, the total retail sales of consumer goods increased from a decline in June, with a year-on-year increase of 3.1% and a month-on-month increase of 0.53%. Among them, clothing, shoes and hats, and knitted textiles increased by 1.2% year-on-year.
5. Cotton imports decreased both month-on-month and year-on-year
In June, domestic textile companies had insufficient new orders, downstream consumption was weak, and cotton imports decreased compared with the previous month. According to data from the General Administration of Customs, cotton imports in June were 163,000 tons, down 10.6% month-on-month and 4.4% year-on-year. Among the source countries, the United States still ranked first, accounting for more than 80%. From January to June 2022, my country imported a total of 1.135 million tons of cotton, a year-on-year decrease of 26.6%; in the first 10 months of this year, China imported a total of 1.503 million tons of cotton, a year-on-year decrease of 40.3%.
6. In 2022, the first batch of central reserve cotton will arrive at 300,000-500,000 tons
On July 8, relevant departments issued an announcement that in order to promote the smooth operation of the cotton market, the first batch of central reserve cotton will be organized in 2022. It will be launched on July 13, 2022, and the end time will be determined in a timely manner based on the market situation, rotation situation, etc. The total volume is 300,000-500,000 tons, and the daily listed quantity is arranged in a balanced manner and dynamically adjusted in principle. The transaction objects are limited to cotton target price reform processing enterprises determined by the Xinjiang Uygur Autonomous Region and Xinjiang Production and Construction Corps in 2021/2022. The incoming cotton is serrated fine-staple cotton produced and processed in 2021/2022 and has been included in the professional supervision of Xinjiang cotton.
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