Market Analysis: According To USDA Production And Marketing Forecast, Uncertainties In The Global Cotton Market Increase

Internationally, according to the latest USDA production and sales forecast, in September, USDA reduced the global cotton output in 24/25, by 260000 tons to 25.34 million tons compared with the previous month, of which the output side was significantly reduced to 3.16 million tons for the United States; Total consumption decreased by 100000 tons to 25.2 million tons compared with last month. At present, the good growth rate of American cotton in the new year has declined, and the uncertainty of American cotton production in the new year has increased due to extreme weather; From the demand side, the global consumption situation has not changed significantly. Although the signing progress of the United States has improved this year, the overall signing situation is still at a low level over the same period of the past years.

First, due to weather and other factors, the US cotton output has been significantly reduced, and as the Federal Reserve opens the road to cut interest rates, the impact on bulk commodities is on the high side. It is expected that the US cotton probability rate will maintain a slightly stronger trend of shock.

　　 Favorable factors:

1. The Federal Reserve started to cut interest rates, which has a positive impact on commodities.

2. American cotton output is uncertain due to weather, and this year's output may be less than expected.

　 Negative factors:

1. The signing situation of American cotton in the new year is still at its low level over the years.

2. The global economic growth is slowing down, and the demand is likely to decline in the future.

3. There are certain risks in the future US elections, which may lead to trade conflicts and increase the trade costs of countries, thus having a negative impact on consumption.

On the domestic side, according to the latest commercial inventory in August, China is in the middle of the same period over the years. It is expected that the supply side will continue to maintain a loose state before the new flowers are listed. On the new cotton side, it is expected that the national cotton production rate will be about high this year, and the market expected output will be about 6 million tons; Although the upstream ginning factory is not active and the cotton price is expected to be low, the recent rise in cotton futures prices has increased the uncertainty of the weighing price of new cotton. On the demand side, the domestic sales in August were OK, and the export performance was average. At present, the increase of new orders is limited, and the downstream links are mainly used as soon as they are bought. It is expected that this year's "golden nine and silver ten" will probably not be prosperous in the peak season.

At present, the cotton fundamentals are under pressure, but one of the concerns of the current market is the impact of macro interest rate cuts on bulk commodities; On the other hand, the upcoming purchase of new cotton is expected to guide the price of the disk. It is expected that cotton will be greatly affected by the macro in the short term, and Zheng Mian may be subject to strong shocks in the short term. In addition, the enthusiasm for the purchase of new cotton is not high, but the cotton price has risen significantly recently, increasing the uncertainty of the purchase price.

　 Favorable factors:

1. Macro inflation leads to the rise of commodity prices.

2. The rush harvest exceeded expectations, and the purchase price of seed cotton rose.

Potential profit expectation: market rumors may have reserves this year.

Negative factors:

1. The growth of cotton in the new year is good, and the output is expected to be equal to or even higher than that of last year.

2. The improvement range of "Gold Nine Silver Ten" is limited, and orders in the downstream market are less than expected.

3. Problems in the US economy and the US election may have a negative impact on future cotton consumption.

　　 Part II Fundamentals

1、 International market: According to the latest USDA global cotton production and sales forecast in September, global cotton production and consumption increased in 24/25, and the contradiction between global supply and demand structure was not obvious.

According to the latest USDA forecast report on global cotton supply, production and sales in September, the total global cotton output in September is expected to be 25.34 million tons, 260000 tons less than that in the previous month; Compared with last month, the total consumption in the new year decreased by 100000 tons to 25.2 million tons.

1. America: The excellent rate of American cotton decreased in that month, the sales progress was average, and the supply side was reduced due to the recent disturbance of weather factors.

The climate of the United States in that month had a certain impact on American cotton output. According to the latest USDA supply and demand report, the estimated output of American cotton in the new year was 130000 tons lower than that in the previous month, to 3160000 tons, which was at the lowest level in history.

According to the current growth of American cotton, the overall temperature performance can be predicted that the cotton yield in the new year will continue to decline slightly in the later period. According to the USDA American cotton growth weekly report, the excellent rate has declined recently, but it is still in the middle of the same period over the years. As of September 22, the cotton boll opening rate of the 15 major cotton planting states of American cotton was 63%, 60% higher than the average level of the same period in the past five years, 3 percentage points faster than the average level of the same period in the past five years. The cotton quality rate of the 15 major cotton growing states in the United States was 37%, 7 percentage points higher than that of the same period last year. The cotton harvest rate of 15 major cotton growing states in the United States was 14%, 2 percentage points faster than that of the same period last year; The average level of the same period in the past five years was 12%, 2 percentage points higher than the average level of the same period in the past five years.

At present, the signing status of American cotton is still at a low level. As of September 12, the cumulative signing volume of American cotton was 1104800 tons, a year-on-year decrease of 11.19 percentage points. The current signing progress of American cotton is 44%, 11 percentage points behind the five-year average; The cumulative shipment volume is 200000 tons, and the current shipment progress is 8%, 3 percentage points behind the five-year average. Recently, the contracted quantity of American cotton in the Chinese market is very low, which leads to the continuous low contracted quantity of American cotton.

Due to weather and other factors, the US cotton output has been significantly reduced, and as the Federal Reserve opens the road to cut interest rates, the impact on bulk commodities is on the high side. It is expected that the US cotton probability rate will maintain a slightly stronger trend of shock.

2. India: The production in the new year has been reduced.

According to AGRICOOP, as of September 13, 2024, the cotton planting area of India in 2024/25 was 11.25 million hectares, 1.074 million hectares lower than the same period of the previous year, 8.7% lower than the same period of the previous year. Indian cotton planting is coming to an end. The total planting area of India is estimated to be around 1125-1130 hectares, with a year-on-year decrease of 8.5% - 9%.

According to the statistics released by AGM, the market volume of Indian cotton last week fell 83% year on year. As of the week of September 8, 2024, Indian cotton had a weekly listing volume of 3700 tons, 568 tons less than the previous week; India's cotton market volume in 2024/25 is 23700 tons, down 81% year on year.

The rainstorm and flood disaster in early September severely affected Mahabubabad and Kammam. According to the historical data, the rainfall at that time was at a high level in the same period over the years, but the recent monsoon rainfall ended, and the rainfall in the main cotton producing areas of India dropped significantly. As of the week of 2024/09/12 to 2024/09/18, the weekly rainfall in the main cotton producing areas of India (92.4%) was 10.7mm, 18.9mm lower than the normal level, and 26.7mm lower than the same period last year. From 2024/06/01 to 2024/09/18, the accumulated rainfall in the main cotton production area is 918.5 mm, 222.9 mm higher than the normal level. At present, the planting of Indian cotton is coming to an end, and the dry weather is conducive to the removal of earlier ponding.

India's cotton output is expected to decline significantly in the new year, and the seed cotton in the Indian market is supported by the lowest purchase price, so it is expected that the price of Indian cotton is relatively strong compared with other markets.

2、 Domestic market: New flowers are coming on the market, and the cotton output in the new year will increase with a great probability. The market will pay attention to the purchase of new cotton and the purchase price.

1. The commercial inventory in 23/24 is in the middle, and it is expected that the supply side will remain loose before the new flowers are listed.

According to the latest data from China Cotton Information Network, China's cotton commercial inventory in August was 2.1468 million tons, a month on month decrease of 631400 tons, and a year-on-year increase of 516200 tons; The inventory in Xinjiang was 1.0266 million tons, a month on month decrease of 528200 tons and a year-on-year increase of 2374 tons.

2. The planting area in Xinjiang has slightly decreased in the same proportion, and the output in the new year is expected to increase compared with this year.

According to the latest survey of cotton planting area in China, the cotton planting area in China in 24/25 was about 40.88 million mu, 0.7% less than that in 23/24; The current output in the new year is predicted to be about 6.238 million tons, an increase of 3.8% compared with 23/24; The planting area of Xinjiang in the new year is about 36.88 million mu, an increase of 0.6% compared with this year, and the output is expected to increase by 5.5% to 5.901 million tons compared with this year. In general, the cotton planting area in Xinjiang has not changed significantly this year, but the weather in Xinjiang is good this year, and the weather is suitable for cotton growth. The cotton yield may be higher than last year, but the quality may not be as expected due to the recent climate.

3. Ginning mills are cautious about the purchase price of new cotton this year, and the overall expectation is low, but the recent rise in cotton prices has led to increased uncertainty in the purchase.

The growth of new cotton is good this year, and the overall output is expected to increase with a high probability compared with that of last year. However, the cotton price performance this year is relatively general, and cotton farmers do not have a strong expectation of reluctant sales for the opening price this year. In terms of ginning plants, the trend of cotton this year is relatively general. Last year, many ginning plants were operating at a loss. In the case of weak cotton price trend, the overall enthusiasm of ginning plants this year was not as good as before, and the expectation of new cotton harvest this year was not very high. It is understood that the price of ginning plants in this year was not very ideal, and even they chose to operate on their own because they could not afford to go out, At present, most ginning enterprises are not very optimistic about the future market. According to the survey, the expected price of most weighing enterprises this year is around 5.5-6.5 yuan/kg. However, in fact, ginning mills and cotton farmers will adjust the expected purchase price according to the price. Considering that the current market price is relatively strong and the recent macro factors have driven the trend of bulk commodities to be strong, it is not ruled out that it will have a certain impact on cotton prices. It is recommended to pay attention to the weighing price of new cotton and the changes in downstream demand in the future.

4. 23/24 The cotton import volume was relatively high, and the rise of American cotton led to the narrowing of the internal and external price difference.

According to the customs' latest announcement, China's cotton import volume in August was 150000 tons, 30000 tons less than the same period last year; From January to August, the cumulative import of cotton was 2.16 million tons, 1.3 million tons more than the same period last year; In 2023/24 (September August), accumulative imports will be 3.26 million tons, an increase of 1.84 million tons over the same period of the previous year. Considering the large amount of imported cotton at present, it is estimated that a part of imported cotton will enter the national storage in combination with the data of the same period over the years and the quota quantity.

From the perspective of internal and external price difference, the rise of American cotton in September led to further narrowing of the internal and external price difference.

Last July, 750000 tons of sliding allowance tax quota was issued, and this policy of sliding allowance tax quota issuance increased 200000 tons in August, which has little impact on domestic cotton supply.

5. The cotton reserve policy has not yet been announced.

Considering the large volume of imported cotton this year, it is estimated that some of the imported cotton will enter the national storage. It is estimated that there are 2-3 million tons in the national storage. This year's reserve cotton rotation policy has not been announced so far, but there is a rumor that there may be a purchase and storage in the near future. Considering that the current purchase and storage may cause large fluctuations in the volume, even if there is a probability of purchase and storage in the future, it may be after the purchase of new cotton.

6. At present, there is no obvious increase in downstream demand. Although cotton prices have risen recently, the market has a weak expectation of the future market. The willingness to stock up at all links is not high, and most of them are based on demand procurement.

At present, although entering the peak demand season, downstream enterprises do not have high expectations for the future market. Most of them are wait-and-see or purchase on demand. Although textile enterprises' yarn inventory has been reduced to a certain extent, the performance of terminal orders generally makes downstream textile enterprises not actively purchase raw materials. According to the data of China Cotton Information Network, as of the end of August, the cotton industrial inventory of textile enterprises in the same period was 849200 tons, an increase of 42200 tons over the previous month and 60800 tons over the same period last year; The yarn inventory of textile enterprises was 25.23 days, down 3.09 days month on month, up 2.12 days year on year; The grey fabric inventory in the same period was 29.76 days, a decrease of 3.56 days month on month and 6.36 days year on year.

The retail sales of clothing, shoes and hats, knitwear and textiles in August were 99.4 billion yuan, up 1.22% year on year. The cumulative retail sales from January to August were 904.6 billion yuan, up 3.26% year on year.

According to the latest data from the General Administration of Customs, in August 2024, China's textile and clothing exports increased, and China's textile and clothing exports reached 27.949 billion US dollars; From January to August, China's textile and clothing exports totaled US $198 billion, down 1% year on year. Among them, the export volume of textiles (including textile yarns, fabrics and products) was 93.1 billion US dollars, up 2% year on year; The cumulative export of clothing (including clothing and clothing accessories) was US $104.9 billion, down 3.7% year on year.

In terms of terminal consumption, the current domestic consumption data is average, while the export of clothing is still in the middle low position in the same period over the years from the perspective of export data. With the demand entering the golden nine and silver ten peak season, it is expected that the downstream demand may slightly improve month on month in the future, but it is also facing certain pressure, especially the export market is increasing with the uncertainty of the US presidential election.

　 Part III Future Market Outlook and Strategies

Domestic and international market outlook:

Internationally, according to the latest USDA production and sales forecast, in September, USDA reduced the global cotton output in 24/25, by 260000 tons to 25.34 million tons compared with the previous month, of which the output side was significantly reduced to 3.16 million tons for the United States; Total consumption decreased by 100000 tons to 25.2 million tons compared with last month. At present, the good growth rate of American cotton in the new year has declined, and the uncertainty of American cotton production in the new year has increased due to extreme weather; From the demand side, the global consumption situation has not changed significantly. Although the signing progress of the United States has improved this year, the overall signing situation is still at a low level over the same period of the past years.

Due to weather and other factors, the US cotton output has been significantly reduced, and as the Federal Reserve opens the road to cut interest rates, the impact on bulk commodities is on the high side. It is expected that the US cotton probability rate will maintain a slightly stronger trend of shock.

On the domestic side, according to the latest commercial inventory in August, China is in the middle of the same period over the years. It is expected that the supply side will continue to maintain a loose state before the new flowers are listed. On the new cotton side, it is expected that the national cotton production rate will be about high this year, and the market expected output will be about 6 million tons; Although the upstream ginning factory is not active and the cotton price is expected to be low, the recent rise in cotton futures prices has increased the uncertainty of the weighing price of new cotton. On the demand side, the domestic sales in August were OK, and the export performance was average. At present, the increase of new orders is limited, and the downstream links are mainly used as soon as they are bought. It is expected that this year's "golden nine and silver ten" will probably not be prosperous in the peak season.

At present, the cotton fundamentals are under pressure, but one of the concerns of the current market is the impact of macro interest rate cuts on bulk commodities; On the other hand, the upcoming purchase of new cotton is expected to guide the price of the disk. It is expected that the short-term internal revenue of cotton will have a large macro impact, and it is expected that Zheng Mian will be mainly shocked in the short term. In addition, the enthusiasm for the purchase of new cotton is not high, but the cotton price has risen significantly recently, increasing the uncertainty of the purchase price.