Economic Observation: The Global Cotton Production Has Increased, And The Cotton Market Has Fallen Recently

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The cotton market fell slightly this week. According to the commodity market analysis system, the spot price of 3128B lint on May 17 was 16210 yuan/ton, with a weekly decline of 1.68%, down 2.54% from the beginning of the month. In terms of futures, Zheng Mian's main force fell first and then rose. On Wednesday, it once fell below the five thousand mark, and then rebounded strongly. As of the 17th, the settlement price of Zheng Mian's main contract was 15230 yuan/ton, with a weekly decline of 0.23%, about 3% lower than that at the beginning of the month.

Domestic market: the planting end is stable, and the inventory drops slightly. From the weather point of view, the temperature in most cotton regions in Xinjiang is relatively high and the precipitation is close to normal. The meteorological conditions are generally conducive to the growth of cotton seedlings. Therefore, at present, the cotton planting area in Xinjiang will decrease slightly in 2024, but the yield per unit area may be higher than last year in good weather. According to the latest data, as of April, the total commercial inventory of domestic cotton was 4.3359 million tons, down by 98900 tons compared with last week. At present, the inventory level is in the middle range of recent years. In the case of falling cotton prices, the spot delivery is better, but the textile enterprises are still in the mentality of just needing to replenish stocks.

International market: the global cotton output will increase significantly in 2024/25. According to the latest data from the United States Department of Agriculture (USDA) in May, the total global cotton output is expected to be 25.92 million tons in 2024, an increase of 1.19 million tons compared with 2023. Among them, the cotton output of the United States increased significantly by 860000 tons to 3.48 million tons, that of Brazil by 460000 tons to 3.64 million tons, and that of Turkey by 170000 tons to 870000 tons.

The sharp increase in US cotton production caused the ICE cotton period to fall by a limit for a time this week, with the main settlement being below 75. Subsequently, the US macro data stimulated the expectation of the Federal Reserve to cut interest rates and the market rose slightly. The export of American cotton this week decreased by 38% compared with the previous week, and the shipment slightly decreased by 4% compared with the previous week. The data was weak, and the cotton market fluctuated. As of the 16th, the settlement price of the main contract of ICE cotton was 76.24 cents, with a weekly decline of about 3%.

Demand: cotton yarn inventory increased, and terminal consumption was weak. After the May Day holiday, the downstream textile industry entered the traditional off-season, the startup rate of textile enterprises slowly declined, the cotton yarn inventory also continued to increase, the downstream pressure gradually increased, the cotton yarn price fell, and there was no sign of a sharp improvement in demand in the short term. In April 2024, the purchasing managers' index (PMI) of China's cotton textile industry was 40.60%, 12.15 percentage points lower than that of the previous month, falling again below the withering boom line. Affected by the sharp drop in raw material prices and the arrival of the off-season, downstream enterprises are generally in a shrinking and wait-and-see state.

According to the data of the National Bureau of Statistics, in April 2024, the retail sales of clothing, shoes and hats, knitwear and textiles in China will be 104.8 billion yuan, down 1.13% month on month and 2.0% year on year; In April, China's textile and clothing exports totaled US $23.934 billion, down 6.72% year on year. Domestic demand fell on a year-on-year basis, exports fell on a year-on-year basis, and there was no good news for terminal consumption in the short term.

Future market forecast: downstream orders in May were poor, and yarn and grey cloth began to accumulate. Under the drag of demand and the reduction of weather speculation probability, it is expected that cotton prices will maintain a weak and volatile operation, and continue to pay attention to the cotton growth in the new year and the changes in downstream orders.