Market Observation: Expected Increase In Global Cotton Supply

Market review last week

Cotton futures prices at home and abroad rebounded after falling last week. According to the report released by the U.S. Department of Agriculture on May 13, as of May 12, the planting progress of American cotton was faster than that of previous years, and the price of American cotton fell; However, with the gradual digestion of negative factors and the liquidation of some short positions, the price of American cotton has stabilized. The average price of national cotton B index is 16218 yuan/ton, down 327 yuan/ton from last week, down 2.0% month on month. The average settlement price of the main contract of Zhengzhou cotton futures was 15120 yuan/ton, down 375 yuan/ton from the previous week, or 2.4%. The average settlement price of the main contract of cotton futures in New York was 75.98 cents/pound, down 2.33 cents/pound from the previous week, or 3.0%. The average price of 32 domestic ordinary combed cotton yarns is 22765 yuan/ton, down 35 yuan/ton from the previous week; The average price of conventional outer yarn is 22540 yuan/ton, down 188 yuan/ton from the previous week.

Future prospects

The global cotton supply is expected to increase, the consumption growth is weak, and the cotton price has great resistance to rise. The global cotton production and demand forecast released by the US Department of Agriculture in May shows that the output in 2024/25 will be 25.92 million tons, the consumption will be 25.44 million tons, and the output will exceed the demand by 480000 tons, which is more relaxed than the basic balance of production and demand in this year. In addition, according to the data of the US Department of Commerce and the Department of Labor, the inflation rate in April was 3.4%, an increase of 0.3% over the previous month, which still has an impact on residents' consumption. According to the data released by the Ministry of Economy of Japan on May 16, Japan's textile wholesale and clothing sales index in the first quarter of this year fell 2.65% compared with last year. On the whole, it is more likely that international cotton prices will continue to consolidate at a low level in the short term under the dual pressure of abundant supply and weak consumption.

The domestic new cotton planting was smooth, and the downstream market entered the off-season. According to the recent field survey conducted by the National Cotton Market Monitoring System in Xinjiang, the weather in the northern Xinjiang production area is good, which is conducive to cotton growth. Although the planting area has slightly decreased compared with that of the previous year, the yield increase is expected to be strong. With the textile market entering the off-season, the textile mill yarn inventory has increased. According to the recent survey conducted by the National Cotton Market Monitoring System, as of the beginning of May, the yarn inventory of domestic textile mills had sold for 28.8 days, an increase of 0.1 days month on month, 7.8 days year on year, and 9.0 days more than the average level of the same period in recent five years. In view of the above situation, it is expected that domestic cotton prices will remain low in the short term.