According to the USDA Export Weekly Report, in the week of June 9-15, 2023, the contracted volume of U.S. upland cotton exports in 2022/23 was 9,693 tons, a decrease of 57% from the previous week and an 83% decrease from the average level of the previous four weeks. The main buyer was Bangladesh. (8036 tons), China (7627 tons), Taiwan (1566 tons), Egypt (499 tons), etc.; but at the same time, some buyers have canceled a large number of US cotton contracts this year, including Turkey (4608 tons) and Pakistan (3519 tons). ), Vietnam (976 tons), resulting in the net contract volume of U.S. upland cotton for the 2022/23 year in the week of June 9-15 being less than 10,000 tons.
Industry analysis shows that on the one hand, U.S. cotton has already entered an “oversold” rhythm this year. The remaining cotton resources in the United States are generally of low grade and have poor spinnability. Not only are buyers wary of new contracts, but also because some of the 2022/23 U.S. cotton is delivered according to the contract. There are some difficulties in delivering goods, and it is not uncommon for buyers and sellers to negotiate to terminate the contract or to extend the contract to the next year (such as Turkey); on the other hand, due to the launch of early-maturing cotton in Pakistan and the expected cotton planting area and total output in 2023, Pakistan Some cotton mills and traders are still unable to issue letters of credit, so the cancellation of this year’s US cotton contract is expected.
What needs attention is that in the week of June 9-15, the United States signed 42,585 tons of upland cotton exports for the 2023/24 year, of which China’s contracted volume reached 31,167 tons, accounting for 73.19% of the total U.S. upland cotton contracted for the next year that week, which is higher than the top three. Zhou’s contracted volumes surged to 1,996 tons, 499 tons, and 14,500 tons, an increase of 115% compared to the week of June 2-8.
Why did China aggressively sign contracts for 2023/24 US cotton in mid-June? Industry analysis mainly has the following reasons:
First, there is a strong expectation that domestic cotton prices will run at a high level in 2023/24. Driven by factors such as tight cotton supply in 2022/23 (a sharp increase in consumption and a year-on-year plunge in cotton imports); expectations of a decline in domestic cotton area and yield in 2023, and a greater probability of a harvest in the Xinjiang market in 2023/24, cotton prices next year will The trend may be strong, so Chinese buyers will replenish their stocks on dips.
Second, the price difference between domestic and foreign cotton has expanded again, making it more attractive to domestic cotton-using enterprises. In the week of June 9-15, ICE cotton futures had “four consecutive negative days”, and the main December contract broke through 80 cents/pound, causing the price of imported domestic and foreign cotton to exceed 1,500 yuan/ton under the 1% tariff. For some hands For cotton-related enterprises with cotton import quotas, signing contracts for Yuanyue shipments is a wiser choice.
Third, the ICE cotton futures near-month and far-month contracts are flat or inverted, which is beneficial for buyers to sign contracts for 2023/24 cotton. Different from the tightening of domestic cotton supply next year, under the expectation of an overall increase in global cotton production, the ICE market has been in an inverted structure in the near and far months for a long time. The bargain signing purchase not only locks in cotton resources suitable for spinning in advance, but also improves the 2023/24 year. The risk of violent fluctuations in cotton prices has dropped to a low level.
Fourth, some cotton textile companies and traders have strong expectations for the recovery of the global economy and the recovery of consumption of cotton textiles, clothing, etc. in 2023 and 2024. They judge that there is greater hope for the “return” of medium-to-high value-added and high-profit traceability orders from Europe, the United States, and Japan, and signed the contract In 2023/24, U.S. cotton is preparing to receive and arrange orders.
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