Recently, the “high fever” in cotton prices at home and abroad has subsided. USDA released its supply and demand forecast for June. The overall report was slightly bearish. It increased global cotton production and reduced consumption slightly. In addition, for the inventory-to-consumption ratio in 22/23, USDA once again raised it to 68.1%, an increase of 0.31% from the previous month. Due to the early drought in Texas, the main US cotton-producing area, the farm abandonment rate is expected to be as high as 25%. The supply and demand balance sheet of the US cotton region this month has not changed significantly compared with the previous month. However, recent rainfall in Texas has been abundant, and soil moisture has been greatly improved. According to the U.S. Cotton Growth Weekly Report, as of the week of June 12, the U.S. cotton planting rate was 94%, 7 percentage points higher than the same period last year; the high-quality cotton rate was 46%, 1 percentage point higher than the same period last year. Therefore, there is still some room for upward adjustment in US cotton production. In India, the southwest monsoon has landed early and moved northward rapidly. There has been abundant rainfall in central cotton areas such as Gujarat, Maharashtra, and Madhya Pradesh. Not only is the cotton planting area expected to increase significantly, but the planting progress is far ahead, which can fully make up for the drought in the northern cotton areas. Substandard area. In China, according to a survey by the National Cotton Market Monitoring System, China’s actual cotton sowing area will increase by 2.5% year-on-year in 2022. At present, cotton in Xinjiang is in the budding stage, which is earlier than in previous years. The recent weather conditions are relatively favorable. Cotton farmers expect that this year’s output may be higher than last year’s level. Overall, with the increase in planting area and the easing of drought, the global supply may show a loose pattern in 2022/23.
Looking at the global consumption prospects, the World Bank has lowered its global economic growth forecast for 2022 to 2.9%. Affected by tense international relations and the impact of the epidemic on the global economy, the overall global cotton consumption situation is not optimistic. According to data from the U.S. Department of Labor, the U.S. Consumer Price Index (CPI) rose 1% month-on-month in May this year and 8.6% year-on-year. In the early morning of the 16th, Beijing time, the Federal Reserve announced an interest rate hike of 75 BP at its interest rate meeting, the first time in 28 years. The Federal Reserve firmly anchors its 2% inflation target. According to the dot plot, officials predict that the benchmark interest rate will rise to 3.4% by the end of this year, which means that it will need to raise interest rates by 175 basis points this year. However, Fed Chairman Powell said at the press conference after the interest rate resolution that the decision was to anchor inflation expectations at 2% and that it is expected that a 75 basis point interest rate increase will not become the norm. The Federal Reserve’s aggressive interest rate hike not only wants to bring down high inflation, but also implies the risk of a recession in the U.S. economy. The further increase in market capital borrowing costs is not conducive to the overall rise in global commodity prices.
Domestically, the current main contract price of Zheng cotton has dropped, but the price points of textile enterprises still have not significantly increased the volume. Most traders are still pessimistic about the market outlook and are worried about falling prices in the future. Therefore, procurement is still mainly about replenishing stocks for rigid needs. The hedging opportunities of cotton ginners are becoming increasingly slim, and they still hold a large amount of lint that has not yet been sold. As of June 9, the national sales rate was 58.7%, down 39.5 percentage points year-on-year, and 25.5 percentage points lower than the average over the past four years. Sales in Xinjiang were 55.8%, down 42.6 percentage points year-on-year, and 27.8 percentage points lower than the average over the past four years. . The average cotton industrial inventory usage days are about 28.1 days (including the quantity of cotton imported into the port), an increase of 1.3 days month-on-month; the total cotton commercial inventory is 3.4005 million tons, and the overall destocking pace is slow. Although the ginners are facing financial pressure due to the approaching repayment period, and some manufacturers have begun to cut prices to sell goods, most manufacturers still offer firm prices in the hope of reducing losses.
The quantity of foreign cotton entering and leaving the port is relatively low. At present, less foreign cotton arrives at the port. Textile companies just need to replenish their stocks and purchase foreign cotton at the port. Among them, the customs clearance foreign cotton transaction is slightly but the inventory is low. Some textile companies use sliding tax to purchase bonded supply, but the transaction volume is small; the overall trading volume at the port Less active. Due to the inverted price of domestic and foreign cotton, China’s domestic enthusiasm for importing foreign cotton is not high. At the same time, because China’s consumption is lower than expected, a large amount of cotton inventory imported at the beginning of the year is still in bonded warehouses; the continued appreciation of the US dollar has also put pressure on import costs. However, the United States will ban the import of all Xinjiang products starting from the 21st of this month, and according to feedback from some export traders, the United States Customs is currently becoming more and more strict on the traceability of imported cotton textile products; the United States calls on its allies to take the same measures. The European Union also passed a resolution calling on Europe to ban the import of Xinjiang products and further reduce its dependence on China. At present, some e-commerce platforms in Europe and the United States have removed Xinjiang products from their shelves. Even European and American e-commerce apps in China cannot search for Xinjiang products – Sam APP, Walmart APP, eBay, etc. cannot search for Xinjiang products. This may force my country’s foreign trade export textile companies to reduce the use of Xinjiang cotton and use high-priced foreign cotton.
Overall, the negative factors for domestic and foreign cotton are greater than the positive factors. In the short term, cotton prices are still in a state of easy falling and difficult to rise. Although the market is speculating that planting costs will rise this year, in the face of weak consumption, the rising costs will inevitably be compromised by insufficient consumption. In addition, the market is beginning to ventilate, and Biden is inclined to relax some of the Trump-era restrictions.��Tariffs, he is inclined to remove some products from the list of tariffs imposed on Chinese products imported to the United States during the Trump era to combat soaring inflation. However, in the face of the border ban, even if the additional tariffs on China are really lifted, it will only be a flash in the pan for the price trend of Zheng cotton.
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