In the short term, cotton prices are expected to maintain an optimistic trend. This view is mainly based on two drivers: the first driver is cost support from the upstream production end, and the second driver is demand support from the downstream. On the one hand, due to the expected reduction in cotton production in the new year and the expansion of ginning mill capacity, the purchase price of seed cotton is expected to be high, so the cost side will have a certain supporting effect on cotton prices; on the other hand, the demand from textile mills this year is good, and the inventory of cotton yarn mills Maintaining a low level, coupled with the upcoming peak demand season of “Golden September and Silver October”, the market outlook will be bullish for cotton prices.
The planting area and output have decreased
Domestic cotton planting areas are divided into inland areas And Xinjiang, Xinjiang’s cotton output is between 5 million and 6 million tons, and the mainland has about hundreds of thousands of tons. However, the domestic cotton planting area has gradually decreased this year. In the Mainland, the increase in profits from competitive crops such as corn and soybeans has replaced the planting area of cotton. On the one hand, Xinjiang was guided by policies, which led cotton farmers to switch to growing grains. On the other hand, due to weather disasters in the early stages of cotton planting this year, some areas had to resow more than four times. Farmers were worried that resowing would affect the growth progress of cotton, so they had to Without switching to other crops, the cotton planting area in Xinjiang has decreased year-on-year. Overall, my country’s cotton planting area and output have decreased this year compared with last year.
Although cotton production has decreased, ginners have further expanded their production capacity this year. According to market estimates, the number of production lines in ginneries will increase by more than 100. For seed cotton, supply has decreased while demand has increased. Seed cotton is expected to open higher in the new year. In addition, the cost of cotton cultivation has further increased this year, and the cost of land rental, pesticides, and chemical fertilizers have increased significantly, which is also beneficial to the purchase price of seed cotton. According to estimates, the pre-sale price of seed cotton in the new year is about 7.5 yuan/kg, which translates into lint price of more than 17,000 yuan/ton, so the cost side has a supporting effect on cotton prices.
The demand-side performance is very impressive
Generally speaking, cotton There is a positive correlation between consumption and global economic growth. Last year, the epidemic caused the economy to shrink, and cotton consumption also fell sharply. This year, as the global epidemic situation overall improved, the economy gradually recovered, and cotton consumption also increased. According to estimates from the United States Department of Agriculture, global cotton consumption is expected to grow for two consecutive years in 2020/2021 and 2021/2022, so we see that my country’s downstream demand performance is very impressive this year.
Cotton consumption is mainly reflected in terminal textile and clothing consumption, which is divided into two markets: export and domestic sales. In terms of domestic sales, in the first half of this year, the monthly retail sales of textiles and clothing increased year-on-year, which means that the sales of terminal textiles and clothing have returned to the level before the epidemic. At the same time, export sales are also in the process of continued improvement. However, the exports of textiles and clothing have become differentiated. The current single-month exports of textiles have declined year-on-year, while the single-month exports of clothing have increased year-on-year. Last year, with the large-scale export of anti-epidemic materials, textile exports also increased significantly. However, this year, with the overall improvement of the epidemic, the export of anti-epidemic materials decreased, and textile exports were not as good as the same period last year. If last year is excluded, this year’s textile exports will be placed in the historical range. Look, it’s still at a historically high level, and it’s also growing compared to the same period in 2019. At the same time, clothing exports continued to show positive growth in the first half of this year, and also increased compared with the same period in 2019.
Overall, textile and clothing exports have continued to improve this year, and the author maintains a relatively optimistic attitude towards the future demand for textiles and clothing. my country’s main exporters of textiles and clothing are Europe, Japan and the United States. Clothing imports from these countries and imports from China are both higher than the same period last year, but there is still room for growth compared with before the epidemic. Among them, U.S. wholesalers’ clothing inventory is currently at a low level after depuration, while clothing retail sales continue to improve, and there is a need for replenishment. Against this background, my country’s terminal textile and clothing exports are expected to continue to perform well.
The improvement in demand for textiles and clothing is reflected in the upstream demand for textiles. Textile factories generally have obvious off-peak and peak seasons. The peak demand season in the first half of the year is generally from March to April, and the off-season gradually begins in May. However, this year, the off-peak and peak seasons for textile companies are not obvious, or it can be said that “the peak season is more prosperous and the off-season is not.” “light” characteristics. Therefore, we can see that the operating rate of textile companies has maintained a high level since March, and current orders from spinning mills can last until September. In addition, the finished product inventory of textile companies is at a historically low level, and the profits of spinning mills this year have reached a historical high. On the whole, the textile end is operating well, with strong support for cotton yarn and cotton prices. At the same time, the approach of the peak demand season of the “Golden Nine and Silver Ten” will also further promote cotton prices.
Prevent risks in three aspects
Looking forward to the market outlook, the future The risks mainly lie in three aspects: the epidemic worsens out of control, international trade relations deteriorate, and demand is lower than expected. Firstly, there are two drivers in the third quarter, one is the cost side and the other is the demand side. Although the cost side is relatively certain, there are certain risks on the demand side. There are still some recurrences in the current epidemic situation. Since July, the epidemic has spread in many provinces and cities in China. Although the overall situation is controllable, the recurrence of the epidemic will have a certain impact on people’s travel, cargo transportation or demand. If the disease occurs again later,If the virus mutates or the epidemic gets out of control, it will be detrimental to the recovery of consumption. Secondly, the United States is expected to announce its exit from QE in the third and fourth quarters, and the general rise in commodities may come to an end in the fourth quarter, which will have a restraining effect on the space above cotton prices. The third aspect is that the current downstream market is generally optimistic about the market outlook, and there is a high enthusiasm for stocking up. Cotton and cotton yarn have increased more than gray fabrics. If future demand is less than expected, there may be a callback demand.
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