Market Analysis: The Global Market Is In Abundant Supply, And The Cotton Price In The Downstream Is Not Booming

The global cotton supply side is expected to increase in the new year. The ending inventory has risen for three consecutive years and is at a high level. The demand side is relatively saturated and the growth is sluggish. The global cotton supply is loose as a whole. At present, there is a large gap between the internal and external prices of cotton, and there is a great pressure on the domestic cotton. This year, the number of imported cotton is expected to reach 3.09 million tons, and the commercial inventory is slowly destocking compared with last year, As a result, domestic supply is loose, downstream domestic textile enterprises continue to lose money in spinning, the operating rate is reduced, and the inventory of yarn and grey cloth is accumulated and digested slowly. At present, cotton has entered a critical growth period. The weather in the United States and Xinjiang needs to be paid attention to in July, August, and July are the transition period for cotton flowers to enter the golden nine silver ten textile peak season. The wholesale inventory of American textiles and clothing has been removed smoothly this year, In the later period, it still has the power of phased procurement. At the same time, it needs to pay attention to the variable trade policy risks brought to China by the US election in November.

On the whole, global supply is abundant, downstream demand is not strong, and cotton prices fluctuate downward. Pay attention to the rebound opportunities brought by the weather change and overseas periodic order demand. The bottom support is 13000, and the upper pressure is 16000.

In terms of operation, it is recommended that lint processing enterprises conduct high level hedging on actual inventory; Textile cotton enterprises suggest that they can purchase cotton appropriately in the undervalued areas. As the medium and long term is weak due to shocks, they can purchase put options to hedge the risk of decline; Speculators in the short and medium term suggest shorting every high.

On July 25, China's cotton price index (CC Index) was 15595 yuan/ton, down 15 yuan/ton from the previous trading day. July 25 cotton yarn (20235, - 80.00, -0.39%) index (CY Index C32S) price is 22020 yuan/ton, 30 yuan/ton lower than the previous trading day. According to Zhengzhou Commodity Exchange, on July 25, 2024, there will be 12392 (- 138) cotton warehouse receipts, including 11901 (- 138) registered warehouse receipts and 491 (+0) effective forecasts.

According to the United States Department of Agriculture (USDA), the net contracted volume of American upland cotton in 2023/24 in a week from July 12 to July 18 is -16828 tons (including 862 tons of contracted cotton and 17690 tons of early contracted cotton cancelled), which is the lowest weekly net contracted volume in this year. 29778 tons of upland cotton were shipped, an increase of 16% over the previous week and an average decrease of 11% over the past four weeks. Net contracted Pima cotton of this year is - 45 tons; 522 tons of Pima cotton were shipped, 47% less than the previous week. This week, 64841 tons of new year's upland cotton and 1111 tons of new year's Pima cotton were signed. In the current week, China's net contracting volume of this year's upland cotton was - 1429 tons (including 91 tons of newly contracted cotton and 1520 tons of previously cancelled cotton), which was 75% lower than that of the previous week; 7394 tons were shipped, 5% less than the previous week. Pima cotton was not signed and shipped within weeks. Another 4785 tons of new year upland cotton were signed.

According to the data of the National Bureau of Statistics, the yarn output of enterprises above designated size will reach 1.954 million tons in June 2024, down 3% year on year and up 4.6% month on month. From January to June, the cumulative yarn output was 10.866 million tons, down 1.5% year on year. According to the data of the National Bureau of Statistics, the distribution output of enterprises above designated size will be 2.87 billion meters in June 2024, a year-on-year decrease of 2.7% and a month on month increase of 2.87%. From January to June, the cumulative cloth production was 15.87 billion meters, up 2.1% year on year.