Market Observation: The Future Trend Of Global Cotton Producing Areas Is Considerable, And The Market Perspective Is Not Optimistic

There is no problem in the world's cotton producing areas. Except for the Mississippi Basin in the United States, where the weather forecast is less rainfall, drought may occur in the future, which needs continuous attention. The cotton drought in the budding period will cause cotton bolls to fall off..

On this Wednesday, the National Development and Reform Commission issued an announcement on matters related to the application for import quotas at preferential tariff rates other than cotton tariff quotas in 2024. The amount of cotton import sliding tax quota issued this time is 200000 tons, all of which are non-state trade quotas, and are limited to be used for processing trade import. Since the use of sliding standard tax quota in 2018, there has been a quota of at least 400000 tons every year. This year's quota of 200000 tons is significantly lower than the market expectation.

In terms of intermediate link demand, the operating rate of the cotton mill has further weakened while the profit has increased month on month, indicating that the cotton mill has reached the critical point of inventory and started to actively de inventory. However, this week, the finished product inventory of the cotton mill is still in storage. It is expected that the operating rate will further decrease, and there is still room for the direct demand for cotton to decline.

The start up of domestic cotton mills has further decreased, and the demand for cotton has weakened, maintaining the shock and empty view.

According to the data of the Ministry of Agriculture and Farmers' Welfare of India, as of July 25, the cotton planting area in India had reached 10.53 million hectares, down 8% from 11.35 million hectares in the same period last year. Data shows that the planting target of the agricultural sector is close to 13 million hectares, and 81% of the planting has been completed by July 25. The department has not yet released an updated breakdown of state planting data. However, some information is provided in the reports of the Department of Agriculture of Maharashtra, Gujarat and Terengana.

As of July 29, the planting area in Maharashtra State has decreased by 0.7% over the same period last year, although the area on July 18 was 4% higher than that of last year; This is also the case in Talangana (from 8% increase to 5% decrease as of July 31). The cotton planting area in Gujarat has lagged behind last year for a long time and is now down by 13%. On July 24, the US Department of Agriculture's Overseas Service Bureau predicted that the cotton planting area in 2024/25 would be 3% lower than that in 2023/24, because they expected some farmers to plant more profitable crops, such as rice, beans and oilseeds.

Harvesting in Brazil's main cotton producing states is proceeding as planned. According to the Institute of Agricultural Economics of Mato Grosso State (IMEA), as of July 26, about 24% of the harvest had been completed, an increase of nearly 11 percentage points over last week. The progress was the same as that of the same period last year, but slightly behind 2022 (when the cotton planting area in the state dropped by more than 20%). The ginning and grading work is still in a fairly early stage. So far, the test results of some batches still show high micronaire values. The reports of other cotton producing states are generally reassuring. The output is unlikely to reach the excellent results of last season, but it will still be high from a historical perspective. It is said that the quality results of Bahia state are excellent so far.