After experiencing low fluctuations in the past two weeks, Zheng cotton futures experienced a breakthrough increase this week, with a cumulative increase of 415 yuan/ton in a week, an increase of 2.9%. From recent domestic and foreign market observations, the cotton market shows signs of stability and improvement. As we enter March, the market begins to pay attention to planting intentions for the next year. Due to the sharp increase in the cost of chemical fertilizers, pesticides and land rental in 2022, cotton farmers’ planting costs have increased significantly. The average purchase price is 13,500 yuan/ton, and cotton farmers’ income has decreased. According to the National Cotton Market Monitoring System survey, cotton planting area is expected to decrease by 3.5% in 2023, of which Xinjiang planting area is expected to decrease by 1.7%. In addition, the market is waiting for the target subsidy policy for the new year.
From a consumption perspective, internal and external sales tend to diverge. In terms of exports, Xinjiang cotton traceability issues have caused a sharp decline in export orders for most export companies. End customers directly place orders to Southeast Asian countries, resulting in a significant loss of domestic export orders. In terms of domestic sales, the operating rate of yarn mills remains high, with orders maintained until the end of March and early April, with profits of about 1,000 yuan/ton. Among them, the home textile sector is particularly eye-catching, and wedding demand is expected to pick up after the epidemic. At the same time, the sharp increase in hotel demand has led to an explosion in demand for bedding, and orders for home textiles have been booming. Although short-term orders have still not improved, with the national temperature rising next week and the convening of the two sessions and the expectation of market recovery, it is expected to enhance the confidence of the downstream market, increase the willingness to place orders, and domestic sales are stable and improving.
Texas, the main foreign producing area in the United States, has gradually entered the planting window period for next year, and the weather has attracted much attention. In 2022, Texas will experience the most severe La Nina phenomenon in the past decade. The dry weather has caused the abandonment rate of Texas to reach a record high. . According to the World Meteorological Organization’s forecast, this year will gradually shift from La Nina to El Nino, which means that the drought in the United States will gradually ease. However, the model shows that the probability of El Niño occurring from April to June is only 15%, and that from May to July is 35%. Therefore, during the critical planting period from April to June, the drought will not be significantly alleviated, and there are still large variables in the supply of US cotton. From the perspective of overseas demand, the retail sales of clothing and clothing accessories in the United States in January increased by 6.3% year-on-year and 2.5% month-on-month; Japan’s clothing imports in January increased by 22.14% year-on-year and 19.51% month-on-month; Turkey Clothing exports in January increased by 8.55% year-on-year and 72.58% month-on-month. Overseas terminal apparel markets have experienced varying degrees of growth, and demand has improved.
Judging from US cotton signings, with the recent exhaustion of high-priced cotton in the Southeast Asian market and the start of demand, the Southeast Asian market has a good demand for US cotton, and US cotton signings have performed well. To sum up, on the domestic supply side, the target price subsidy policy has not been determined, and the market is worried about the planting area in 2023; on the demand side, because it is in the traditional peak season of “Gold, Three, Silver and Four”, the market has been operating well recently, and the market is worried about the planting area in 2023. In the later period, we still maintained a cautiously optimistic attitude. Abroad, because the drought in Texas has not been significantly alleviated, next year’s output is still the focus of market concerns; on the demand side, European and American retail sales have picked up significantly recently, with orders showing positive growth year-on-year and month-on-month, and the US cotton contract performance is good, so during the critical planting period Combined with the traditional peak season, the market should not be overly pessimistic.