The Global Cotton Market Is In The Process Of Recovery.

The northern hemisphere has entered the critical period of cotton growth, and the market concerns have gradually shifted from demand to supply. The weather changes in the United States and the locust disaster in India and Pakistan are worth the attention of the market.

Recently, commodity prices have rebounded significantly in the wake of the recovery of crude oil and the depreciation of the US dollar, and the cotton market has gradually come out of the doldrums. India announced the new cotton MSP price for the new year, raising the purchase price of seed cotton in 2020/2021 to 55.25 to 58.25 rupees / kg, equivalent to 66 to 73 cents / pound of ICE disk, which is about 10% higher than that of ICE cotton. As of June 8th, the ICE cotton maker's July contract closed at 60.69 cents / pound, down from earlier 62.36 cents / pound, but still at a 3 month high.

Overall decline in willingness to grow cotton

At the end of March, China Cotton Association carried out cotton planting intention survey in the whole country. According to the survey, China's cotton planting intention area was 46 million 182 thousand and 600 mu in 2020, a decrease of 4.10% over the same period last year. Xinjiang cotton planted area of 36 million 446 thousand and 500 mu, down 1.16% compared to the same period. Recently, China's Ministry of agriculture and rural research shows that domestic cotton planting area has dropped by 3.9%. Although the two data are different, they all show that the willingness of new cotton planting in China is decreasing. At the end of March, the target price of cotton direct subsidy in Xinjiang fell to the ground, which helped to improve the enthusiasm of Xinjiang cotton growers, and the cotton planting area in Xinjiang decreased or limited. However, as cotton prices fell sharply, cotton growers in the cotton fields in the mainland had a greater impact. The cotton planting area in the cotton area of the mainland continued to maintain a significant decline, and inefficient growers would be eliminated.

In March 31st, the US Department of Agriculture released the report on crop planting intentions in 2020. It is estimated that the 2020/2021 cotton planting area will reach 13 million 703 thousand acres in the year, a slight decrease of 0.25%. The data collection was completed before early March, and the actual planting area is expected to be lower than that in March. India Cotton Association has predicted that the new cotton planting area will drop by about 8%. However, the industry believes that India cotton MSP will increase its actual planting area, or reduce it to 2%.

Overall, the cotton planting area of three major cotton producing countries in China, the United States and India has declined in varying degrees in 2020/2021.

Domestic textile exports are better than ever.

Affected by weak demand, cotton imports have dropped sharply this year. According to customs data statistics, from 2020 to April, 1 tons of cotton were imported from China in April, a decrease of 30.6% compared with the same period last year. From September 2019 to March 2020, cotton imports totaled 1 million 153 thousand and 100 tons, down 19.7% from the same period last year. Imports of cotton yarn were flat. In 2020 1 to April, 610 thousand tons of imported cotton yarn were basically flat. From September 2019 to February 2020, 1 million 120 thousand tons of imported cotton yarn were imported, a slight increase of 0.9% over the same period last year.

In May, exports of textiles and clothing improved, with exports of textiles better and clothing remained temporarily sluggish. According to the latest statistics of the General Administration of customs, in May 2020, the export volume of textiles and clothing was 29 billion 554 million US dollars, an increase of 38.36%, an increase of 24.02% over the same period last year. Among them, exports of textiles (including textiles, yarns, fabrics and articles) amounted to US $20 billion 648 million 700 thousand, an increase of 77.34% over the same period last year. Exports of garments (including garments and accessories) were US $8 billion 905 million 700 thousand, down 26.93% from the same period last year.

Cotton mill load remains low

According to the data, in June 5, 2020 of the week, the yarn load index of China was 50.6%, of which the load of pure cotton yarn factory was 44.5%, the load index of Chinese grey fabric was 49.4%, and the load of cotton fabric was 48.7%. At present, the inventory pressure of the downstream fabric is still relatively large, and the survey samples show that the cotton raw material inventory of textile enterprises is at a low level in recent years. As the global new crown pneumonia epidemic situation has improved, the overall economic recovery has become a consensus in the market and consumer confidence has gradually increased. The market expects foreign trade orders to resume before July. The order of large enterprises can also be maintained at around the low level of operation until about August. Through the darkest hour.

Increase in fund positions

CFTC holdings data show that as of June 2nd, the US cotton futures + options held a total of 240594 hands, and the US cotton holdings increased for 5 consecutive weeks. In June 2nd, when the United States cotton began to appear in non commercial positions, it turned over more. The number of non commercial bulls increased from 2998 to 42868, with an empty single reduction of 3383 to 32258 hands, and non business net positions increased by 6381 to 10610. Business bulls reduced by 953 to 116628 hands, and commercial shorts increased by 5881 to 123170. The drought in the southwestern cotton area of the United States has caused the fund to focus on cotton and hedge funds.

All in all, as the impact of the epidemic on the economy has gradually weakened, the expected recovery in the overall decline in cotton demand will usher in the dawn of cotton prices. The northern hemisphere has entered the critical period of cotton growth, and the market concerns have gradually shifted from demand to supply. The weather changes in the United States and the locust disaster in India and Pakistan are worth the attention of the market. In addition, attention should still be paid to the order maintenance of cotton spinning downstream and the sustainability of late demand. After experiencing the most pessimistic market environment in 3 and April, the global cotton market is in the process of recovery.