Since July, the global economic recovery has been slow and gradual, while the Chinese economy has recovered steadily. Cotton growth in the northern hemisphere is normal, cotton supply is expected to be stable, and consumption maintains a recovery trend. The loose pattern of global cotton supply and demand is expected to improve in the new year. The center of gravity of cotton prices will shift upward slightly. Funds and consumption will become the leading forces in the cotton market.
Part One Review
1. International cotton prices continue to oscillate and rise
In July, the global economy is still facing the test of the epidemic, but Most countries have resumed work and production, and their economic operations have gradually stabilized. International cotton prices have continued their slow upward trend since early April. In early July, ICE cotton prices rose and approached 65 cents/pound. From mid-to-late July, Sino-US relations experienced renewed turbulence, and international cotton prices fell briefly, but ICE cotton futures prices have not yet fallen below 60 cents/pound. Since the end of July, drought has continued in the Texas cotton area of the United States, and China has continued to import U.S. cotton. International cotton prices have resumed their upward momentum. However, due to weak demand, the overall increase in spot prices has been small. As of August 13, 2020, the settlement price of the main ICE cotton futures contract was 62.99 cents/pound, an increase of 2.11 cents/pound or 3.47% from the beginning of July. The International Cotton Index represents the average CIF price of imported cotton in China’s main port. (M) The average price is 69.41 cents/pound, an increase of 1.13 cents/pound, or 1.92%, from the beginning of July. The import cost in RMB is 12,215 yuan/ton, an increase of 87 yuan/ton, or 0.72%, from the beginning of July.
2. The upward trend of domestic cotton prices is relatively stable
As my country’s epidemic was the first to be effectively controlled in the world, production and operations recovered rapidly, and the industrial chain recovered smoothly and orderly. In the face of declining external demand, textile companies increased their efforts to develop the domestic demand market and actively bid for cotton reserves to reduce spinning costs. Cost, catering to the current downstream low-count yarn market demand. Compared with the international market, domestic cotton prices have been rising more steadily. The Zheng Cotton 2009 contract exceeded 12,100 yuan/ton in mid-July, 12,200 yuan/ton in late July, and 12,300 yuan/ton in early August. As the gauze market has not improved, the increase in cotton prices has been limited. As of August 13, the settlement price of Zheng Cotton Futures 2009 contract was 12,210 yuan/ton, an increase of 460 yuan/ton or 3.91% from the beginning of July. The national cotton price B index (representing the price of 328-grade lint cotton in the mainland) was 12,224 yuan/ton. , an increase of 385 yuan/ton, or 3.25%, from the beginning of July.
Part 2 Analysis
1. Domestic and foreign macroeconomic environment
The global economic recovery is slow and gradual. Boosted by the previous economic restart, some economic indicators in European and American countries rebounded sharply. In July, the U.S. ISM manufacturing PMI and the European Markit manufacturing PMI indexes were 54.2 and 51.8 respectively, both of which were significantly restored to above the boom-bust level. Employment, retail sales Some economic indicators have rebounded beyond expectations, but have not yet returned to pre-epidemic levels. Until a vaccine is available, economic recovery will be slow and gradual, largely dependent on the course of the epidemic. The World Bank predicts that the global economy will shrink by 5.2% in 2020, of which developed economies will shrink by 7%, and emerging market and developing economies will shrink by 2.5%. The global economy will resume growth by 4.2% in 2021, of which developed economies will grow by 3.9% and emerging markets will rebound by 4.6%.
The domestic and international dual cycles promote each other and promote new development. According to customs data, my country’s imports and exports increased by 6.5% year-on-year in July, far exceeding market expectations. Exports have been growing for four consecutive months since April. According to the latest data from the World Trade Organization, my country’s imports and exports performed better than the world. major economies. Compared with other developing countries, China’s economy has obvious advantages in comprehensive competition. Both the World Bank and the IMF predict that the global economy will shrink in 2020, and China is the only country with positive economic growth. In response to the huge impact of the epidemic on the economy, the central government has promoted the implementation of the “six guarantees” and “six stability” policies, proposed a new development pattern in which the domestic cycle is the mainstay and the domestic and international dual cycles promote each other. It pays more attention to making up for shortcomings and using reform to promote develop.
2. Analysis of supply and demand situation
(1) Supply
1. Foreign cotton supply situation
The growth of new cotton in the United States has deteriorated and output has declined. As of August 9, 2020, the budding rate of U.S. cotton was 96%, and the progress of cotton boll setting and catkins were 71% and 9% respectively, a decrease of 1 percentage point and 8 percentage points compared with the same period last year, and the growth status reached good or above. Accounting for 42%, a decrease of 14 percentage points from the same period last year. The U.S. Department of Agriculture estimates that U.S. cotton production in 2020/21 will be 3.936 million tons, a year-on-year decrease of 9.23%. In addition, 680,000 tons of U.S. cotton contracted and unshipped in 2019/20 will be carried forward to the new year.
India’s cotton planting area has increased, and the minimum purchase price has been raised in the new year. According to the forecast of the Indian Meteorological Department, the weather is expected to return to normal levels in August, which is conducive to cotton growth. As of August 7, the cotton sown area in India was 185 million acres, a year-on-year increase of 4.13%. At present, the Indian Cotton Company is still selling cotton stocks at low prices. 518,500 tons have been sold, leaving 1.4195 million tons of remaining stock. India will enter the 2020/21 cotton year in October, and the minimum purchase price (MSP) of cotton will be increased by 5%, which is greater than the 2% increase in the previous year.
The quality and output of new cotton in Pakistan have declined. According to the Ministry of National Food Security and Research of Pakistan, cotton sowing in Pakistan has ended, and the cotton planting area is 36.855 million acres, a year-on-year decrease of 1.3%. Currently, southern Sindh and New Cotton provinces in Pakistan areAccording to the report, in July 2020, my country’s textile and clothing exports were US$31.294 billion, a year-on-year increase of 13.74%. Among them, the export volume of textiles (including textile yarns, fabrics and products) was US$15.9769 billion, a year-on-year increase of 48.38%, and clothing (including Clothing and clothing accessories) export volume was US$15.3175 billion, a year-on-year decrease of 8.54%. In April, May and June 2020, the year-on-year growth rates of textiles reached 49.36%, 77.34%, and 56.72% respectively, while the year-on-year decreases in clothing were 30.31%, 26.95%, and 10.2% respectively.
Part Three Predictions
According to the latest global cotton production and demand forecast released by the International Cotton Advisory Committee (ICAC) (Table 1), global cotton production in 2020/21 is 24.77 million tons, a decrease of 90,000 tons from the previous month and a year-on-year decrease of 1.38 million tons, a decrease of 5.3%. Consumption volume was 23.85 million tons, an increase of 540,000 tons from the previous month and an increase of 900,000 tons year-on-year, an increase of 3.9%. The situation of production exceeding demand has shrunk from 3.2 million tons in 2019/20 to 920,000 tons in 2020/21. Global ending stocks remained at a high of 22.88 million tons.
If the global epidemic is brought under control and there is no second rebound, the economy will recover weakly and international cotton prices will slowly rise based on demand recovery. In view of the increasingly complex international environment, instability and uncertainty have increased significantly, and the vulnerability of the international financial market has increased. The U.S. presidential election on November 3 this year coincides with the launch of new flowers on a large scale, and there is a high probability that market fluctuations will intensify.
2. Cotton prices in the new and old seasons are expected to be smoothly integrated, and the purchase price of new cotton may open lower and move higher
Judging from the recent situation, the daily new cases in Xinjiang are gradually decreasing. The epidemic is under control and is unlikely to affect the harvest and marketing of new cotton. The 2019/20 cotton season is coming to an end. The growth of new cotton is basically normal. Cotton supply is expected to remain stable in the new year. The domestic cotton production and demand forecast of the National Cotton Market Monitoring System in August remains unchanged (Table 2). Cotton prices in the new and old seasons are expected to be smoothly integrated. Before the large-scale launch of new cotton, the instability and uncertainty from the international market will restrain the rise of domestic cotton prices to a certain extent. However, in the medium and long term, under the general trend of continued recovery of consumption, the purchase price of cotton will follow the trend of new cotton. The gradual reduction of cotton resources has led to a steady increase process, and overall it has shown a trend of opening low and moving high.
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