The New Year has begun, and the Spring Festival is approaching. Cotton prices have shown a new atmosphere in the New Year. CIE US cotton has broken through new highs, hitting a high of 124.78 cents/pound in the past ten years. In addition, as shown in Figure 1, both the ICE US cotton main contract and the Zheng cotton main contract showed an upward trend in January. The ICE US cotton main contract rose by 8.43 cents/pound on a monthly basis, an increase of 7.48%; the Zheng cotton main contract rose by 910 yuan/ton. An increase of 4.39%. The holiday risk aversion sentiment has not yet been reflected in cotton prices. Can cotton prices continue to maintain their upward trend after the new year?
Figure 1 Trend of domestic and foreign cotton futures in 2021-22
First, from the perspective of the global pattern, looking back at the global cotton supply and demand situation from 2012 to 2021, the current cotton inventory-to-consumption ratio is at a low level in the past three years, at 76%. The cotton supply and demand pattern is tighter than that in 2021/21 and 2019/20, mainly due to the global The ending inventory dropped to 19.286 million tons, and consumption increased to 27.087 million tons. Although the output was increased by 2.147 million tons, the ending inventory still dropped by 620,000 tons compared with 2020/21.
In addition, in the USDA January report, global cotton supply and demand data for 2021/22 have been adjusted, and the overall center is bullish. The main change data is that global cotton beginning stocks were reduced by 40,000 tons, production was reduced by 130,000 tons, and the total supply side decreased by 170,000 tons; global consumption decreased by 10,000 tons to 27.05 million tons; global ending stocks were 18.51 million tons, month-on-month. A decrease of 160,000 tons and a year-on-year decrease of 2.462 million tons.
Judging from annual data and monthly data, global cotton has better rising momentum; therefore, in 2021/22, the global cotton supply and demand pattern supports the focus of cotton prices to move higher than in 2020/21.
Figure 2 Global cotton supply and demand trends from 2012 to 2021
Broken down by country, the U.S. cotton supply decreased by 633,000 tons in 2021/22, with a total supply of 4.76 million tons; demand increased by 360,000 tons, to 740,000 tons; ending stocks increased by 54,000 tons, to 740,000 tons; The inventory-to-consumption ratio is at a relatively low level in the past five years, at 17%, but an increase of 2 percentage points from 2020/21, mainly due to an increase in output of 800,000 tons.
According to the global production demand forecast released by the United States Department of Agriculture in January, U.S. production, exports and ending stocks in 2021/22 will be reduced month-on-month, while domestic consumption will increase month-on-month. Among them, U.S. cotton production decreased by 140,000 tons month-on-month to 3.84 million tons, mainly due to a decrease of 36 pounds/acre in U.S. cotton yields; U.S. factory cotton consumption increased by 10,000 tons to 560,000 tons; U.S. cotton exports due to reduced production , global logistics issues decreased by 110,000 tons month-on-month to 3.27 million tons; overall, the ending inventory of U.S. cotton in 2021/22 fell by 40,000 tons month-on-month to 700,000 tons.
In 2021/22, U.S. cotton supply and demand are relatively tight, and the upward momentum is strong; although there are problems with exports, the overall pattern is also neutral.
Figure 3 U.S. cotton supply and demand trends from 2012 to 2021
Judging from India’s data, the country’s cotton supply was reduced by 477,000 tons in 2021/22, a decrease of 4.85%; demand increased by 89,000 tons, an increase of 3.31%; cotton ending stocks were reduced by 566,000 tons, and the inventory consumption ratio was 36%, compared with It will be reduced by 9 percentage points in 2020/21. The changes are mainly due to the fact that the opening inventory of Indian cotton in 2021/22 dropped by 511,000 tons compared with 2020/21, consumption increased by 174,000 tons, and exports decreased by 85,000 tons.
Judging from monthly data, India’s output in 2021/22 dropped by 110,000 tons month-on-month, domestic consumption increased by 40,000 tons month-on-month, and ending stocks fell by 150,000 tons.
In addition, according to the December forecast of the Indian Cotton Association, India’s cotton output in 2021/22 will be 5.918 million tons, a decrease of 204,000 tons from the previous month, mainly due to the decline in cotton planting area and yield in the cotton-producing areas of northern India; from October to December 2021, India The total supply of cotton was 7.448 million tons, of which 2.389 million tons of new cotton were on the market, 2.55 million tons were imported, and the beginning inventory was 1.275 million tons. During the same period, India’s cotton consumption was 5.695 million tons, and the export volume was 1.326 million tons. At the end of December The inventory is 1.275 million tons, including 5.389 million tons in textile factories and 2.601 million tons in other stocks. The ending inventory is increased by 218,000 tons to 1.275 million tons. The overall changes were that beginning stocks decreased by 850,000 tons year-on-year, production decreased by 83,000 tons year-on-year, imports increased by 85,000 tons year-on-year, and total supply decreased by 848,000 tons; consumption remained stable year-on-year, and ending stocks remained stable year-on-year.
Although the USDA data and the Indian Cotton Association data are slightly different, the overall trend is that the Indian cotton supply and demand pattern in 2021/22 is tighter than that in 2020/21.
Figure 4 Indian cotton supply and demand trends from 2012 to 2021
Judging from the situation in Brazil, the cotton inventory-to-consumption ratio in 2021/22 was increased by 33 percentage points to 112%, mainly because production increased by 518,000 tons to 2.874 million tons, exports decreased by 591,000 tons to 1.807 million tons, and ending stocks increased by 376,000 tons. 10,000 tons is 2.797 million tons.
Judging from Brazilian data, in 2021/22, Brazilian supply and demand data will hinder the rise of global cotton prices; however, 80% of Brazilian cotton’s main producing areas are Mato Grosso, Mato Grosso do Sul, and Goiás Cotton. planting periodIt is from September to November, and the picking period is from February to May. Cotton supply lags half a year behind that in the northern hemisphere. Therefore, Brazil is still running the supply and demand situation in 2020/21, and its current inventory-to-consumption ratio is at a low of nearly 6 years, at 79%.
Figure 5 Brazilian cotton supply and demand trends from 2012 to 2021
Back in our country, China’s cotton inventory-to-consumption ratio in 2021/22 is 91%, a decrease of 7 percentage points from 2020/21, which is simultaneously at a low in the past three years and the second lowest in the past decade. In the 2021/22 season, China’s cotton production fell by 599,000 tons to 5.824 million tons; imports decreased by 568,000 tons to 2.235 million tons; ending stocks fell by 664,000 tons to 7.882 million tons. The supply side decreased by 654,000 tons and the demand side temporarily stabilized, triggering a tightening of cotton supply and demand in China.
Figure 6 China’s cotton supply and demand trends from 2012 to 2021
To sum up, judging from the annual and monthly supply and demand data of the world and major cotton-producing countries, high cotton prices at home and abroad have strong support. From a fundamental point of view, the current shipment volume of US cotton is low, but the contract volume is 4% higher than that of the same period. The number of US cotton on call unmarked prices is relatively high, and the March contract is still suspected of being squeezed; the export volume of Indian cotton has decreased, and the import volume has increased. , consumption increased; Brazil’s cotton production decreased in 2020/21, and cotton production increased in 2021/22, but it was launched from April to June, and the short-term cotton supply has not increased yet; Pakistan and Vietnam have resumed work and production, consumption has increased, and cotton imports have increased ; The risk of foreign cotton price decline in the first quarter of 2022 in major production and consumption areas is not obvious yet. Follow-up attention will be paid to the Fed’s interest rate hike, India’s cotton policy, US cotton shipments, and new cotton planting conditions.
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