Currently, the global economy continues to recover and has not yet returned to pre-epidemic levels. Global monetary policies have accelerated differentiation under a loose tone. Various uncertainties have not yet been settled. Cotton prices have risen to the highest level since the epidemic. This monthly report will discuss the critical period of alternation between old and new cotton and what the next market trend will be.
Review of the first part
1. International cotton prices oscillate upward
Since the beginning of June, U.S. inflation has hit a new high, asset prices have continued to rise, and international cotton prices have followed the trend; during this period, the Federal Reserve’s interest rate meeting hinted at raising interest rates before the end of 2023, and international cotton prices have Once down; however, the Federal Reserve continued to moderate its interest rate hike remarks and reiterated that inflation is only a temporary phenomenon, and international cotton prices continued to climb to around 90 cents/pound. As of July 27, the settlement price of the main ICE cotton futures contract was 90.23 cents/pound, an increase of 5.98 cents/pound, or 7.10%, from the beginning of June. The International Cotton Index (M), which represents the average CIF price of imported cotton in China’s main port, was The price is 100.85 cents/pound, an increase of 8.88 cents/pound, or 9.66%, from the beginning of June. The import cost in RMB is 16,084 yuan/ton discounted with a 1% tariff, an increase of 1,341 yuan/ton, or 9.10%, from the beginning of June.
2. Domestic cotton prices fluctuate upward
After a period of decline, domestic cotton prices , there was a technical rebound in early June, and Zheng cotton broke through the 16,000 yuan/ton mark on June 11; with the intensive introduction of national policies to ensure supply and stable prices, cotton prices stabilized to 15,400 yuan/ton; since late June, with the The external market rose, and bull funds once again drove the domestic cotton price to rise sharply, breaking through the 17,000 yuan/ton mark, setting a new high since the epidemic. As of July 27, the settlement price of the main cotton futures contract on the Zhengzhou Commodity Exchange was around 17,480 yuan/ton, an increase of 2,010 yuan/ton or 12.99% from the beginning of June; the national cotton price B index (representing the price of 328-grade lint cotton in the mainland) was 17,440 yuan/ton. Ton or so, an increase of 1,688 yuan/ton from the beginning of June, an increase of 10.72%.
Part 2 Analysis
1. Domestic and foreign macro-environment
It is difficult to return the economic rescue policy, and the Federal Reserve faces a dilemma. Entering the second quarter of 2021, although the economies of major economies continue to recover, they have not yet returned to pre-epidemic levels. The current Fed policy faces dilemmas. First, there is a shortage of labor in the United States, coupled with the uncertainty of the new crown epidemic, which affects businesses and economic recovery; second, there is the risk of inflation. U.S. stocks have risen sharply to historical highs, and the U.S. consumer price index in June hit a record high in 2008. The biggest increase since then has increased the need for monetary tightening by the Federal Reserve. We need to be alert to the asset adjustment risks brought about by the Federal Reserve’s early exit from its easing policy or the marginal slowdown in liquidity expansion. The marginal slowdown in domestic economic growth has begun to appear, and economic policies are focused on stability. Data from the National Bureau of Statistics show that my country’s GDP growth rate was 7.9% in the second quarter (quarterly 18.3%, 2-year average 5.5%), and the economy is growing steadily with a marginal slowdown. In May 2021, the country successively launched policies to ensure supply and stabilize prices. On July 15, the central bank lowered the deposit reserve ratio of financial institutions by 0.5 percentage points. It adheres to the stability and effectiveness of monetary policy and does not engage in flooding, but makes precise efforts. , increase support for small and micro enterprises.
2. Analysis of supply and demand situation
(1) Supply
Enter In the latter part of the year, global cotton inventories have declined, but are at relatively abundant levels in history; the weather in the northern hemisphere is normal, which is conducive to the growth of new cotton; the harvest of new cotton in the southern hemisphere is progressing smoothly, and global cotton production is expected to increase in the new year.
1. International cotton market supply
The global cotton supply is relatively abundant in the second half of the year. According to predictions by international institutions, by the end of August 2021, global cotton inventory levels will be 19.94-20.99 million tons, a year-on-year decrease of about 6%, and 4.2-4.3% higher than the average of the past five years. After September 2021, cotton in the northern hemisphere will enter the harvest period. Global cotton production in the new year is estimated at 25.59-25.99 million tons, a year-on-year increase of 5-6%, and 0.8-1% higher than the average output of the past five years.
The weather in the northern hemisphere cooperates, and the growth of new cotton is good. In recent weeks, the rate of high-quality cotton in the United States has continued to increase rapidly. As of July 18, 60% of U.S. cotton had good growth conditions, an increase of 15 percentage points year-on-year. Indian monsoon rains have covered the entire territory, prompting an overall acceleration of cotton planting. As of July 19, the cotton sowing progress in Kupang, India, reached 92%, with a cumulative area of more than 2 million hectares, an increase of 3% year-on-year.
Cotton in the Southern Hemisphere is abundant and of high quality. According to the latest forecast of Brazil’s CONAB, Brazilian cotton production in 2020/21 will be 2.3424 million tons, an increase of 25,000 tons from the previous forecast. As the harvest progresses, the main color grade of Brazilian new cotton is also above M grade; the Australian Cotton Association predicts, Yields in most areas of Australia are 10-15% higher than expected, and Australia’s total cotton output is expected to reach 609,000 tons this year.
2. Domestic cotton supply situation
In the later part of the year, the transfer of domestic cotton to downstream speeds up. According to data from the National Cotton Market Monitoring System, as of July 23, cotton processing enterprises across the country have sold a total of 5.916 million tons of lint cotton (output 5.95 million tons), an increase of 519,000 tons year-on-year; cotton commercial stocks continue to decline, according to data from the China Cotton Association. As of the end of June, the total national cotton turnover inventory was approximately 2.199 million tons, lower than 214,100 tons in the same period last year; textile mill raw material inventories increased. As of the beginning of July, the national cotton industry inventory was 897,000 tons, an increase of 266,000 tons year-on-year.
600,000 tons of cotton reserves will be rolled out to effectively meet the supply of cotton to textile companies before new cotton is launched. To optimize the central/p>
The International Cotton Advisory Committee (ICAC) released global cotton production, sales and inventory forecast data for 2021/22. Global cotton beginning stocks in 2021/22 are 20.99 million tons, a year-on-year decrease of 1.37 million tons, a decrease of 6.13%; global cotton production 25.59 million tons, a year-on-year increase of 1.37 million tons, an increase of 5.66%; consumption was 2580 tons, a year-on-year increase of 200,000 tons, an increase of 0.78%; the ending inventory was 20.77 million tons, a year-on-year decrease of 220,000 tons, a decrease of 1.05%; global cotton production was insufficient to meet demand 210,000 tons, 1.17 million tons narrower than that of 2020/21; the global cotton ending inventory consumption ratio is 80.5%, a decrease of 1.49 percentage points from 2020/21.
Second, domestic cotton production will be reduced in 2021/22, and the inventory-to-consumption ratio will decline
Based on Based on relevant special surveys and analysis of domestic and foreign economic environments and market conditions, the National Cotton Market Monitoring System’s forecast of domestic cotton production, sales and stocks in 2021/22 in July 2021 is as follows: China’s cotton output in 2021/22 is 5.578 million tons, a year-on-year decrease of 37.2 million tons, a decrease of 6.25%; consumption volume was 8.24 million tons, a decrease of 150,000 tons, a year-on-year decrease of 1.79%; import volume was 2.31 million tons, a decrease of 546,000 tons, a year-on-year decrease of 19.13%; ending inventory was 6.21 million tons, a year-on-year decrease 390,000 tons, a decrease of 5.9%; the production-demand gap was 2.662 million tons, 222,000 tons larger than that of 2020/21, and the inventory-to-consumption ratio was 75.44%, a decrease of 3.29 percentage points from 2020/21.
Main conclusions of the fourth part
In summary, the current global monetary policy is in a loose tone The performance is divergent, and the capital market is operating at a high level, but there are many uncertainties and vulnerabilities in the actual economic operation, which increases the complexity of this round of market operation and brings certain troubles to investor expectations. Although the current cotton price has hit a new high since the epidemic, what troubles the market is how sustainable it is? As the cotton market enters the transition period between the old and new years, the weather is a big uncertainty and requires close attention. Before the new cotton is launched on a large scale, the market has a strong bullish sentiment and financial enthusiasm is high. The pace of domestic consumption in the second half of the year needs further observation, and foreign trade development still faces many unstable factors. If no obvious disaster occurs, the evolution of the epidemic does not deviate from the expected track, and the capital market does not undergo major changes, cotton prices are expected to gradually return to a reasonable range in the medium term. </p
