Market Situation: Analysis Of Cotton Price Trend At Home And Abroad

 

In terms of cotton industry in the United States, the degree of land drought in Texas, the main production area, continued to increase in the last month. According to the latest USDA data, as of April 3, the sowing rate of American cotton was 4%, lower than the 5-year average value of 6%. If the drought continues to worsen in the later period, it may have a certain impact on the yield of American cotton.  

In addition, the CFTC report shows that both the may contract and the July contract have a high proportion of open sale contract positions, which will bring long-term support to the market. The Indian market, on the one hand, due to its cotton production reduction in 2021 may exceed expectations, on the other hand, due to the US sanctions on Xinjiang cotton, whether India or Bangladesh and other countries have undertaken part of the foreign orders, cotton demand is fair. Above a variety of reasons lead to foreign cotton prices continue to strengthen.

And the domestic market due to poor demand, lack of driving force. In fact, since the fourth quarter of last year, domestic demand has shown a weak trend. The inventory of textile intermediate products, yarn and cloth, has been increasing. The sales situation of textile enterprises is getting worse and worse, and the profit situation has gradually changed from positive to negative. Textile enterprises are under great financial pressure. According to the data of China cotton information network, as of the end of February, yarn inventory days of textile enterprises were 29.35 days, an increase of 20.38 days over the same period of last year. In the same period, grey cloth inventory days were 35.22 days, an increase of 20.57 days. In terms of profits of textile mills, mainland enterprises basically lost 1000-2000 yuan per ton of common combed c32s cotton yarn.

However, the recent outbreak of multi-point spread has a great impact on consumption, especially the closure of some retail stores and the closure of some textile markets have exacerbated the weakness of the demand side. In the short term, the domestic demand side pressure is still great.

However, when the difference between domestic and foreign cotton prices turns negative, domestic cotton demand may turn around. China is the world's largest importer of cotton and cotton yarn, with an annual import of about 2 million tons of cotton and 2 million tons of cotton yarn. At present, high price imported cotton and cotton yarn are not competitive compared with domestic fancy yarn. Of course, some of them are just needed. However, according to normal logic, if the imported products with more than 4 million tons have no price advantage, domestic textile mills and weaving mills will give priority to domestic cotton and cotton yarn with low price and high quality.

Therefore, we believe that when the difference between domestic and foreign cotton prices turns negative, and this situation continues, the benefits of the consumer side will gradually be reflected. Of course, the current trend of commodities is greatly affected by the macro environment. The process of interest rate increase by the Federal Reserve and the future trend of the conflict between Russia and Ukraine will have an impact on the domestic and foreign cotton price trend, which needs to be focused on in the future.