Global Observation: Cotton Continues To Be In Abundant Supply And Weak Demand

In July, the fundamentals of the cotton market changed little. The cotton supply at home and abroad continued to be abundant while the demand was weak, and the cotton price remained weak overall. According to the commodity market analysis system of the business community, the spot price of 3128B lint on July 10 was 15681 yuan/ton, down 0.61% from the beginning of the month and 3.4% month on month %。

Futures at home and abroad fell simultaneously in the first ten days of July. The trend of Zheng Mian in July rose first and then fell. Under the macro favorable policy, the market confidence has increased, but the downstream demand is difficult to improve. At the same time, affected by the continuous decline of foreign cotton, Zheng Mian futures fell again after rebounding to more than 14800 on the 2nd. As of the 9th, the settlement price of Zheng Mian's main contract was 14605 yuan/ton, down 0.4% from the beginning of the month. In terms of international cotton price, although the cotton price had a slight recovery trend at the end of June, since July, the macro bad news superimposed the impact of rainfall, and the main period of ICE cotton continued to fall. The main contract fell to 70.55 cents on the 9th, down 3.49 cents from the beginning of the month %。

　　 National cotton sales fell by 13.3% year on year, and new cotton production is expected to be high

As of July 4, the national cotton sales rate was 84.3%, down 13.3 percentage points year on year, 2.6 percentage points lower than the average of the past four years. The data of cotton exports to China shows that in June 2024, 195000 tons of cotton will be shipped, a month on month decrease of 183300 tons, or 48.5%.

In July, cotton entered its peak flowering period, and the number of bolls and flowers of cotton plants determined the number of subsequent cotton peaches, which affected the final yield. To ensure adequate nutrition of cotton plants, cotton farmers began to work on topping. This year, artificial topping is still dominant. At present, the cotton of the South Xinjiang and North Xinjiang Corps has gradually entered the peak flowering period. The number of fruit branches is about 8-10, and the number of buds per plant is about 10-12. The overall growth of cotton has exceeded expectations, and farmers' expectations for per unit yield growth have been raised again and again.

　　 Global cotton supply is expected to be abundant this year, which may be further relaxed in the future

The U.S. Department of Agriculture released the 2024 U.S. cotton planting area report. The U.S. cotton planting area in 2024 will be 11.67 million acres, 9% more than the 10.67 million acres reported in the June supply and demand report, and 14% more than the 10.23 million acres reported in the 23/24 year. According to the data released by the Indian Cotton Association (CAI), India's cotton output in 2023/24 will be 5.528 million tons, an increase of 487000 tons over the previous month, or 9.7%. According to the cotton production and demand forecast report released by CONAB in June, Brazil's cotton production in 2023/24 is expected to be 3.66 million tons, an increase of 0.37% from the forecast in May, due to the recent good weather in Brazil.

　 Demand continues to be weak in the traditional off-season

The textile tradition remains in the off-season, and cotton yarn (20135, 10.00, 0.05%), the market price has slightly declined, the sales of finished products has slightly improved, and the stock accumulation has slightly improved. At present, the textile enterprises have few new orders, and the export orders have not been improved. When the overall order is insufficient, the weaving factory produces regular spot goods, but the production and sales situation is not ideal. The weaving factory said that the inventory is basically stagnant, and the inventory of grey cloth continues to increase. According to the data of the National Bureau of Statistics, from January to May, the profit of cotton spinning enterprises above designated size fell by 10.25% year on year, 0.87 percentage points more than that from January to April. In addition, the new orders of small and medium-sized textile enterprises in the mainland have shrunk significantly, and the cotton yarn enterprises have increased production restriction, production reduction, or production conversion of blended yarn and chemical fiber yarn, which has reduced their enthusiasm for cotton procurement.

By the end of last week, the cotton mill's starting load index was 54.4, 0.2 percentage points lower than that at the end of June. Since July, the cotton mill's starting load index has been basically stable; The load index of fabric factory starting was 50.3, 0.1 percentage point lower than that at the end of June, and it has been steadily decreasing since July. In terms of finished goods inventory, the yarn inventory of textile enterprises last weekend was 29.6 days, 0.3 days more than that at the end of June; The inventory of finished products of grey cloth factory was 31.5 days, 0.4 days more than that at the end of June.

Future forecast: cotton fundamentals are still weak, and the downstream market continues to be weak. In the off-season market, textile enterprises are short of orders and the startup rate is low, and terminal demand has not improved significantly. Due to the lack of market confidence, the power of replenishment is weak, and cotton prices do not have the momentum to continue to rebound significantly. It is expected that the probability of the downstream market will remain weak in the short term. July and August are the key growth periods of cotton, so we need to pay close attention to weather changes.