Since September 2021, global economic growth is expected to slow down, inflation remains high, and consumer confidence has declined. Cotton in the northern hemisphere has begun to go on the market, and cotton prices have reached a new high. What is the next trend of the market will be discussed in this monthly report.
Review of Part One
1. International cotton prices experienced a roller coaster ride
Since September, overseas economic growth has slowed down. The Federal Reserve has stated that it may start to reduce bond purchases within the year, but there has been no substantial progress. The global capital market has fluctuated violently, and international cotton prices have fluctuated. After that, at the end of September There was another sharp surge, with ICE exceeding 100 cents/pound, reaching the highest level since November 2011. As of September 28, 2021, the settlement price of the main ICE cotton futures contract was 100.3 cents/pound, up 6.44% month-on-month and 52.69% year-on-year. The average price of the International Cotton Index (M) represents the average CIF price of imported cotton in China’s main port. 111.64 cents/pound, discounted by 1% tariff, the RMB import cost is 17,989 yuan/ton, an increase of 4.64% month-on-month and a year-on-year increase of 44.18%. 2. Domestic cotton prices fluctuated sharply in September. The expected price of seed cotton was relatively high, which supported the increase in cotton prices in the first ten days of September. In the middle and late periods, the downstream “Golden September and Silver Ten” peak season expectations were disappointed, and the loosening of cotton yarn prices further confirmed that domestic cotton prices once fluctuated downwards. ; At the end of September, driven by the sharp rise in the Mid-Autumn Festival external market and the sharply higher purchase price of Xinjiang seed cotton, Zheng cotton rose rapidly, reaching the highest level since May 2012. As of September 28, 2021, the settlement price of the main cotton futures contract on the Zhengzhou Commodity Exchange was 18,555 yuan/ton, a month-on-month increase of 5.67%, and a year-on-year increase of 45.47%; the national cotton price B index (representing the mainland 328-grade lint price) was 18,556 yuan /ton, up 3.13% month-on-month and 45.48% year-on-year.
Figure 1 Domestic and foreign cotton futures price trends since 2020
Part 2 Analysis
1. Domestic and international macro-environment
The global economic growth momentum is slowing down. A continued rise in COVID-19 cases around the world, higher prices and ongoing supply chain challenges have all triggered lower economic growth forecasts. The OECD lowered its forecast for U.S. economic growth in 2021 to 6% from the 6.9% expected in May, and lowered its forecast for global economic growth to 5.7% from 5.8%. In September, the manufacturing PMIs of the United States and the Eurozone were 60.5 and 58.7 respectively. Although they are still in the expansion range above 50, they have peaked and declined since June and July, and demand indicators have begun to weaken, indicating that the chain momentum of economic expansion has slowed down. .
The scissors gap reached a new high, and policy service entities were outstanding. According to data from the National Bureau of Statistics, in August, the national consumer price index (CPI) rose by 0.8% year-on-year, and the industrial producer price index (PPI) rose by 9.5% year-on-year, hitting a new high since September 2008; the two increases were “scissors” apart. “Expanded, hitting a new high since data records began. It shows that raw material prices are running at a high level and there is no substantial transmission to the prices of end consumer goods. The recent central bank monetary policy has proposed that prudent monetary policy should be flexible, precise, reasonable and appropriate, maintain reasonable and sufficient liquidity, and enhance the stability of total credit growth. We will insist on putting serving the real economy in a more prominent position.
2. Domestic and foreign supply and demand dynamics
(1) Supply
In 2021/22, in addition to China’s cotton production remaining stable, most other major cotton-producing countries will increase production, especially Australian cotton, the United States and Brazilian cotton, with expected growth rates of more than 10% respectively. Global cotton supply is expected to be higher than More abundant in the early stage. International agencies predict that global cotton production in 2021/22 will be 24.93-26.037 million tons, a year-on-year increase of 3.06-6.4%, close to the average level of the past five years.
1. Trends in the world’s major cotton-producing countries
U.S. cotton harvest , the processing progress is slow and the rate of good seedlings increases. According to data from the U.S. Department of Agriculture, on September 26, U.S. cotton cotton harvesting progress was 60% and harvesting progress was 11%, respectively 4 percentage points and 3 percentage points lower than the average of the past five years. 65% had good growth conditions or above, an increase of 22 percentage points compared with the same period last year.
The overall cotton harvest in India is delayed and the opening price is high. Affected by the epidemic, cotton planting, harvesting and processing in India have been delayed this year, and large-scale cotton purchases will begin in the first week of November. Only a small amount of seed cotton has been weighed in some cotton areas in northern India, and the price is about 1 times higher than the MSP purchase price. This year, India’s cotton planting area decreased by 6.44% year-on-year. The market volume of new cotton in Pakistan is accelerating. Although Pakistan’s new cotton has been attacked by insect pests recently, the overall situation is optimistic. As of September 1, the volume of Pakistani seed cotton on the market was about 278,000 tons of lint cotton, which was higher than the same period in recent years. Australia has started cotton sowing for the 2021/22 season. As of mid-September, new Australian cotton sowing has begun in Queensland. The Australian Agricultural Resources Economic Research Bureau (ABARES) estimates that the Australian cotton sowing area in 2021/22 will be 496,000 hectares and the output will be 1.044 million tons, which may be the third in history. high level. The Brazilian cotton harvest is coming to an end, making exports less competitive. According to Brazilian CONAB statistics, as of September 18, 2021, the overall harvest progress of Brazilian cotton in 2020/21 is 97.6% (the harvest progress in the same period last year was 99.4%); August to December is the sales and shipment of Brazilian cotton in 2020/21 It is an active period, but the current price of Brazilian cotton shipments is close to that of US cotton and Australian cotton of the same quality, and its competitiveness has weakened compared with the previous year.
2. Domestic cotton supply dynamics
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3. Domestic expectations for a rush to harvest new flowers have been pushed up, and potential risks cannot be ignored. Due to excess cotton processing capacity in Xinjiang, expectations for a rush to harvest new cotton are rising. At the end of September, the open-scale price of some seed cotton in Xinjiang reached more than 9 yuan/kg, and the price of seed cotton and the cost of lint cotton reached 20,000 yuan/ton. , reaching the highest level since 2011. If prices continue to be raised blindly, market risks will gradually increase, and cotton-related companies need to operate with caution. First, cotton is harvested in one season and consumed throughout the year. The rising cost of lint has suppressed the export sales of the textile industry. In the domestic market, overcapacity has made it difficult for prices of downstream textile products to rise significantly. Downstream companies have limited ability to bear cotton prices; second, 10 After the month, new cotton will be launched on a large scale, and the concentrated release of supply has not yet arrived. The possibility of a fall in cotton prices after the acquisition is completed in the later period cannot be ruled out.
4． The “dual control” policy on energy consumption is advancing, and the downstream market is becoming more cautious. After the downstream “Golden September and Silver Ten” peak season expectations failed, the inventory of cotton yarn and cotton cloth increased, and there were even signs of individual yarn sales. Domestic sales orders for gray fabrics were obviously insufficient. Driven by the “dual control” policy on energy consumption, many textile and printing and dyeing factories in some areas have limited power and stopped production. The specific duration and impact remain to be seen. The company actively implements local policies, adjusts business plans, and is more cautious in accepting subsequent orders. It is the general trend to reduce energy consumption, eliminate backward production capacity, and promote industrial upgrading and transformation.
5． The keynote of cotton macro-control throughout the year – stabilizing the rapid rise in commodity prices is the support of the loose monetary policies of the world’s major economies, as well as the impact of the contradiction between market supply and demand. Since September, the State Council executive meeting has twice mentioned “doing… “Good cross-cyclical adjustment.” The National Council’s regular meeting held on September 1 emphasized increasing relief and assistance to market entities, especially small, medium and micro enterprises. The National Council’s regular meeting held on September 22 emphasized “stabilizing reasonable expectations and maintaining stable economic operation.” . As policies are being stepped up to stabilize growth, the contradiction between supply and demand will be alleviated, and it is expected that the prices of bulk commodities, including cotton, will further return to a reasonable range.
Part 3 Production, Sales and Inventory Forecast
1. Global cotton production and consumption have been adjusted to increase in 2021/22
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The September global cotton production, sales and inventory forecast data from the International Cotton Advisory Committee (ICAC) show that the global cotton initial inventory in 2021/22 is 20.66 million tons, a month-on-month decrease of 320,000 tons, a decrease of 1.53%. A year-on-year decrease of 1.47 million tons, a decrease of 6.64%; global cotton production was 24.93 million tons, a month-on-month decrease of 120,000 tons, a decrease of 0.48%, a year-on-year increase of 740,000 tons, an increase of 3.06%; consumption was 2,587 tons, a month-on-month increase of 90,000 tons, an increase of 0.35 %, a year-on-year increase of 210,000 tons, an increase of 0.82%; the ending inventory was 19.72 million tons, a month-on-month decrease of 930,000 tons, a decrease of 4.55%, a year-on-year decrease of 530,000 tons, a decrease of 2.62%; global cotton production is insufficient to require 940,000 tons, compared with 2020/ In 2021, it narrowed by 530,000 tons; the global cotton ending inventory consumption ratio was 76.23%, a decrease of 4.29 percentage points from 2020/21.
2. Domestic cotton consumption in 2020/21 will increase month-on-month, and in 2021/22 Production increased month-on-month
Based on relevant special surveys and analysis of domestic and foreign economic environments and market conditions, in September 2021, the National Cotton Market Monitoring System analyzed the 2020/21 and 2021 The adjustment of domestic cotton production, sales and inventory in 2022 is as follows: The forecast of domestic cotton production, sales and inventory in 2020/21 is as follows: cotton output in 2020/21 is 5.95 million tons, a year-on-year increase of 1.83%, and consumption is increased by 120,000 tons month-on-month to 8.61 million tons. A year-on-year increase of 15.16%; the import volume decreased by 60,000 tons from the previous month to 2.75 million tons, a year-on-year increase of 71.29%. The ending inventory decreased by 180,000 tons from the previous month to 6.28 million tons, a year-on-year increase of 0.77%, and the production and demand gap was 2.66 million tons. The forecast for domestic cotton production, sales and inventory in 2021/22 is as follows: my country’s cotton production in 2021/22 will increase by 100,000 tons from the previous month to 5.68 million tons, a year-on-year decrease of 4.54%; consumption will be 8.24 million tons, a year-on-year decrease of 4.3%; import volume will be 2.31 million tons, a year-on-year decrease of 15.90%; the ending inventory was reduced by 80,000 tons to 5.99 million tons, a year-on-year decrease of 4.59%; the production-demand gap was 2.56 million tons, narrowing by 100,000 tons compared with 2020/21.
Main conclusions
To sum up, the Delta mutant strain continues to spread, rising prices and continued supply chain challenges have triggered a slowdown in global economic growth, a decline in manufacturing prosperity, and capital markets have shown signs of Huge shock. After the cotton market oscillated downward, there was an irrational and rapid surge in the market. The current global epidemic is still evolving, the external environment is uncertain, and the endogenous operating power of the cotton industry chain is still insufficient. With the concentrated release of new flower supply pressure and increased policies to stabilize growth, cotton prices will eventually return to fundamentals. </p
