In the week of mid-August (August 15-19), ICE cotton futures continued to break upward, driven by the extremely positive USDA supply and demand forecast. The main December contract reached a maximum of 119.59 cents. Although it fell back later, it still remained strong. status, closing at 116.01 cents on Friday. As speculative bulls reenter the market, ICE futures positions have steadily increased to 176,000 lots, an increase of more than 20,000 lots from the low of 150,000 lots a month ago.
While the futures market is singing a triumphant song, the spot market is still in stagnant water. Although the recent surge has improved the execution of spot contracts during the slump in cotton prices, textile mills have no choice but to continue to withdraw from the market and wait and see as prices fluctuate violently again and increase too much in a short period of time. Moreover, the global yarn market has been stagnant for a long time, and factories are simply unable to follow the footsteps of cotton prices and increase yarn quotations. Repeatedly, the operation of the textile industry chain becomes more and more difficult. Where can we start talking about cotton consumption?
If the global yarn market and downstream orders go smoothly, textile mills will have little choice but to increase purchases in the face of tight supply (especially US cotton) in the new year. But this time is different. Global yarn manufacturers are still struggling to digest high-priced yarn inventories. With downstream orders sluggish, factory operating rates continue to be low. Countries are trying their best to compress production capacity and reduce purchases, even if cotton looks like I am very nervous, maybe really nervous, but at this time, the factory is simply unable to expand purchases. This is the biggest difference between the current market and the skyrocketing ten years ago. Although the supply is tight, without the support of consumption, rising cotton prices will have little help to the industry.
As cotton prices set off a new round of surge, high-priced cotton purchased intensively by factories in the early stage is gradually arriving in Hong Kong. When the global economy and consumption are deteriorating, it is extremely difficult for textile mills to digest huge inventories of high-priced raw materials, and it takes a long time. Until high-priced inventories are completely digested and downstream demand recovers, global textile mill purchases will not increase significantly. From a macroeconomic perspective, global ultra-high inflation will remain for a long time. Unless the U.S. economy makes a hard landing, inflation will continue in the next year, which will have a profound impact on upstream and downstream consumption and consumer behavior.
Looking back at history, we find that since the cotton price surge ten years ago, global cotton consumption has not grown again and has been in a plateau period for the past ten years. In recent years, the world economy has encountered more and more problems. The carnival of capital is not helpful to reality, but I hope the industry can overcome the difficulties as soon as possible!