In the past month, international cotton prices have risen sharply as a whole. The ICE futures December contract has risen from 110 cents to 118 cents, the March contract has risen to 114 cents, and the Kotruk A index has risen from 120 cents to 118 cents. 125 cents, the spot price in India rose from 57,900 rupees/kand to 66,700 rupees/kand (99 cents to 115 cents), and the spot price in Pakistan rose from 14,600 rupees/maund to 15,900 rupees/maund (104 U.S. dollars). cents rose to 114 cents).
The U.S. Department of Agriculture’s November supply and demand forecast increased global production by 1.5 million bales to 121.8 million bales, and increased consumption by 700,000 bales to 124.1 million bales. At the same time, it also revised historical The data was revised to reduce opening stocks by 1 million bales, ultimately resulting in ending stocks falling by 202,000 bales to 86.9 million bales, the seventh highest on record, and stocks outside China at 50.7 million bales, the third highest on record. The global inventory-to-consumption ratio is 70%, excluding China, it is 53.4%.
Despite ample global inventories, cotton prices continue to rise. Ten years ago, in 2010/11, when prices were rising rapidly, the global ending inventory was only 49.3 million bales, excluding China, it was 38.7 million bales, and the global inventory-to-consumption ratio was 42.7%, excluding China, 45.2%. Even allowing for a wide margin of error, current cotton prices are inconsistent with what they were a decade ago.
In 2010/11, China’s cotton ending inventory dropped to 10.6 million bales, and the inventory-to-consumption ratio was only 23%. The reserve cotton inventory at that time was extremely low, and USDA estimated that China’s ending inventory this year would be It was 36.5 million packages, and the inventory-to-consumption ratio was 91%. Now China continues to release cotton reserves, but as of the end of September, the reserve cotton inventory is estimated to be several times that of ten years ago.
After experiencing a sharp reduction in cotton production and the second-highest export in history last year, the US cotton carryover inventory last year was only 3.2 million bales, and the inventory-to-consumption ratio dropped from 41%. to 16.8%. The United States is the world’s largest exporter, and tight ending stocks in the United States mean that importing countries find it difficult to obtain sufficient cotton resources. In addition, port logistics delays and new cotton harvest delays have also exacerbated the tight supply of US cotton. However, U.S. cotton production is expected to increase significantly this year. Once the new cotton is harvested and processed, the large supply of U.S. cotton will have a significant impact on the cotton market.
Looking at ICE futures prices, although the front-month contract price has risen sharply this year, the increase in the 2022/23 contract has been limited. The December 2022 contract has been around 90 cents. Although it is somewhat higher than the historical long-term average, its performance is far inferior to that of the front-month contract. Prices for competing cotton crops have not surged in recent months, but corn and soybean prices have risen significantly from their post-COVID lows. Although judging from the front-month contract, the US cotton area should increase significantly in 2022/23, the December 2022 contract of cotton has no advantage over the November 2022 contract of soybeans.
The demand situation for cotton is not very clear either. ICE futures prices are now well below the highs of ten years ago, but the surge in cotton prices ten years ago had a lasting impact on cotton consumption by factories. It took the cotton market seven years to recover to the level of 2009/10. The level before cotton prices surged. In the current global logistics crisis, tight short-term supply of cotton may be the main contradiction, but it may also have a negative impact on the amount of cotton used by factories. The gap between global supply and demand this year is only 2.3 million bales. Only a slight adjustment of the balance sheet will change the global fundamentals from a slightly tight supply this year to an oversupply next year. </p
