Market Analysis: Pay Attention To The Cotton Market And Trend At Home And Abroad

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In recent days, the global macroeconomic problems have become the focus. The bankruptcy of the U.S. Silicon Valley Bank and the subsequent problems of Credit Suisse have been reported. Global investors are worried about the spread of banking risks, and their concern about the global economy has intensified. In addition, the rebound of the dollar index yesterday prompted the sharp fall of cotton in the United States that day. The domestic market is worried about the further shrinkage of overseas orders, and cotton textile enterprises are cautious to wait and see, dragging down the trend of Zheng Mian. In this environment, the domestic cotton market is difficult to be independent.

In fact, the factors that determine the cotton market at home and abroad are not the same. The trend of American cotton is more concerned about the supply and demand changes in the global market and the global economy, while the trend of domestic cotton is more concerned about the domestic economic situation. The impact of the trend of American cotton on the domestic market is weakened, but with the decline of American cotton, the price of imported American cotton is approaching the price of domestic cotton, The arrival price of American cotton M1-1/8 is about 16000 yuan/ton, and the average price of domestic 3128B lint is about 15300 yuan/ton. The difference between domestic and foreign cotton prices continues to narrow. If American cotton continues to decline, the probability of domestic cotton falling is great.

This year, China's cotton production increased, and the pressure on the supply side increased. The USDA's supply and demand report in March increased the cotton production in mainland China by 218000 tons to 6423000 tons, a year-on-year increase of 588000 tons, which put more pressure on the already loose supply side. However, the prospects of domestic cotton consumption are not optimistic. Under the background of cotton restrictions in Xinjiang, The recovery of the domestic economy and the performance of the consumer market are important factors supporting the domestic cotton market. In terms of macro economy, the official set the economic growth in 2023 at 5%, which is lower than the target of 5.5% set last year. The performance of domestic macro economy determines the future trend of cotton.

China's cotton import volume has been continuously reduced by international organizations. In the past, as the largest cotton importer, changes in the international cotton market have a great impact on the domestic cotton market. However, in recent years, with the upgrading of trade protection policies in Europe and the United States and the increase in domestic labor costs, some international orders have been transferred to Southeast Asian countries, and the domestic cotton textile industry has been greatly impacted. Especially after April and May last year, the price of domestic cotton was lower than the price of imported cotton, and the quantity of imported cotton in China declined. USDA again lowered the expectation of China's cotton import in its cotton supply and demand report in March. According to the latest data, it is estimated that China's cotton import volume in the 2022/23 market year will be about 1.633 million tons, down by 54000 tons from last month, This data is even lower than the cotton import volume in 2021/22, which will make China lose the low position of the world's largest cotton importer again, lagging behind Bangladesh, highlighting the difficulties China has encountered in cotton textile import and export.

The global cotton consumption and import will decline significantly. The USDA supply and demand report in March lowered the annual global cotton consumption estimate of the market by 120000 tons to 23.974 million tons, while the global cotton import estimate was lowered by 187000 tons to 8.618 million tons. These two data have been reduced for ten consecutive months in this market year. The global cotton import volume is estimated to be 10.35 million tons at the beginning of this market year, with a cumulative reduction of 1.732 million tons. The total reduction is close to the annual import volume of Chinese cotton in this market year, and the prospects of the global cotton market are not optimistic.

In addition, the import data of Bangladesh, Vietnam, Pakistan and Turkey, the major cotton importing countries in the world, have declined to varying degrees. Turkey has just experienced a strong earthquake this year, and the recovery of the cotton textile industry will take some time. Bangladesh and Pakistan have encountered the problem of letter of credit. Vietnam and other countries have been affected by the shrinking global cotton textile consumption, Cotton imports are affected to varying degrees. Although India is expected to increase its cotton imports due to the reduction of its domestic cotton production, its impact on the global market is limited, and the international cotton market is hard to have favorable factors in the short term.

On the whole, the international cotton market is affected by the increase of global macroeconomic risks and the decline of cotton import and export demand, so the international cotton price may fall further. The domestic market should mainly focus on the recovery of China's macro-economy and the growth of consumer demand. However, American cotton continues to decline and overseas cotton textile orders are hard to improve. The domestic market is hard to be independent. In the short term, affected by the decline of foreign cotton, domestic cotton may continue to weaken. However, in the long term, with the recovery of the domestic economy, domestic cotton will be supported, and the space for continued decline is limited, so there is no need to panic too much.