In the first half of this year, domestic and foreign themes continued, and the cotton trend experienced twists and turns. The global epidemic situation is volatile, and mutated viruses once worried the market. However, the European and American economies have accelerated their recovery, and cotton demand has been expected to rebound. On the supply side, weather changes in U.S. cotton-producing areas have provided more room for fluctuations. ICE cotton futures have stabilized at 85 cents after jumping up and down. Nearby, higher than the price at the beginning of the year. While the domestic market was affected by the external market, the transfer of textile orders from countries such as India and Southeast Asia, the Xinjiang cotton crisis, as well as long-short factors such as stockpiling and import quotas were intertwined. Zheng cotton fluctuated endlessly, and the price center of gravity slowly moved upward, recording a 6.5% increase in the first half of the year.
Global cotton production may recover in 20/21, and stocks will remain depleted
In 2021/22, among the major cotton-producing countries, China’s cotton production is expected to decrease, but the output of India and the United States is expected to increase. The latest data from the Indian Ministry of Agriculture show that the cotton sown area is 9.838 million hectares, an increase of more than 1.19 million hectares from the previous report, a decrease of 13% year-on-year, and 9% higher than the five-year average. The recent decrease in rainfall brought by the southwest monsoon in India is conducive to the smooth progress of cotton planting. In the United States, the decline in cotton planting area announced at the end of June was lower than market expectations, and improved weather in the core cotton region of Texas boosted crop output prospects. U.S. cotton production and global production estimates both increased in the July USDA supply and demand report. After global cotton production experienced a sharp reduction in the previous year, production in the new year will return to normal levels.
As the economy gradually recovers from the epidemic, cotton demand expectations are more optimistic, and demand expectations from major consumer countries have all increased. And consumption growth may be faster than production recovery, and global cotton inventories will maintain a depletion trend. The USDA’s July supply and demand report shows that the global end-of-year cotton inventory estimate for 2021/22 has been lowered to 87.74 million bales, compared with 89.3 million bales in June, and this data is significantly lower than the 2020/21 inventory estimate of 91.57 million bales. Bag. In the global market, the focus is mainly on the demand outlook and inventory reduction. Overall prices rose in the first half of the year, and this support will remain effective in the second half of the year.
Overseas orders return & domestic sales market recovers, downstream performance is optimistic
Due to the impact of the new crown epidemic, the exports of India and Southeast Asian countries’ garment industry have shrunk, and some orders for textiles have been transferred to China. According to customs statistics, from September 2020 to June 2021, my country’s cumulative export volume of textiles and clothing was US$244.389 billion, a year-on-year increase of 11.30%; from January to June this year, my country’s cumulative export volume of textiles and clothing was US$140.086 billion, a year-on-year increase of 11.30%. 12.06%. At the same time, under the background of effective epidemic prevention and control in China, consumer sentiment continues to pick up, promoting the recovery of the clothing industry. Moreover, in the first half of the year, the Xinjiang cotton incident involving Western companies promoted the recognition of domestic mainstream textile and apparel companies, and domestic brands showed unexpected growth. Data from the National Bureau of Statistics show that from January to June this year, retail sales of clothing, shoes, hats, and knitted textiles were 673.8 billion yuan, a year-on-year increase of 33.7%. The performance of the textile and apparel market in the first half of the year is gratifying. The global epidemic is expected to improve further in the future. Coupled with the anticipation of stocking up for autumn and winter, the performance in the second half of the year is still promising.
Domestic inventory highs have fallen, and the growth of new cotton needs to pay attention to the weather in the production areas
In 2020/21, the domestic cotton sown area decreased, the yield increased, and the overall output increased slightly. increase. Due to the large price difference between domestic and foreign cotton, the planned transfer of cotton from the state reserve at the end of last year failed to start. In terms of imports, cotton imports increased steadily year-on-year. The supply of cotton on the market is relatively abundant, and domestic cotton inventories were relatively large at the end of 2020, and the destocking process will begin this year. Fortunately, downstream demand is good this year, and the domestic destocking process is going smoothly. As of the end of June, cotton commercial inventories were lower than the same period last year, but cotton industrial inventories were still at an eight-year high for the same period. Domestic cotton stocks are moving downstream, which shows that textile companies are optimistic about the market outlook and are stocking up. However, the high inventory will restrict cotton prices to a certain extent.
New In terms of the production season, in late May, the national cotton sowing area surveyed by the National Cotton Market Monitoring System was 42.463 million acres, a year-on-year decrease of 3.219 million acres, a decrease of 7%, of which the cotton area in Xinjiang was 34.762 million acres, a year-on-year decrease of 56.4%. The decrease was 1.6%, and most of the actual sowing areas in the mainland decreased by more than 10%. At present, the cotton area has periodic weather fluctuations.Rainfall continued for more than a week in some areas of Xinjiang, affecting cotton pollination; Henan suffered heavy rains, causing cotton fields to be flooded. We need to continue to pay attention to the actual impact on cotton production in the future.
Import quotas and reserve selling policies have been implemented one after another, and the cotton market has been in turmoil
The two major policies of cotton import sliding tax quotas and cotton reserves have been affected by the market over the years. Lively discussion. Before policies are announced, rumors come first, and this year is no exception. As for import quotas, according to previous years, the number of new sliding tax quotas is basically around 800,000 tons, mostly from June to August. But this year, after the Xinjiang cotton quilt scandal, there are rumors in the market that a quota of 2 million tons of imported cotton will be issued. The announcement was made at the end of April, but the actual release of 700,000 tons was far lower than expected. This year’s import quotas were announced earlier, which is conducive to downstream companies’ planning and deployment. As of now, the information disclosure of enterprises applying for sliding tax quotas has been completed and has not yet been issued.
Regarding the rotation of reserve cotton, news has been making noise since May, and it was not until early July that it finally officially came to light. According to the announcement, the stockpile will start on July 5, 2021 and end on September 30. The total planned release is 600,000 tons of cotton produced in 2011-2013, which is 100,000 tons more than last year. This is higher than the previous market expectations. The difference isn’t that big. Theoretically, selling reserves will increase market supply and be negative for prices. However, since the rumors have been around for a long time, the negative effects have basically been reflected in the early market. Zheng Mian showed a rise after the announcement. Moreover, the hot bidding situation further exaggerated market optimism. From July 5 to July 22, the total cumulative transaction volume was 133,763.2468 tons, with a transaction rate of 100%.
In the second half of the year, the global economy will still be difficult to “recover” from the epidemic, but as vaccination gradually forms an immune barrier, the impact of the epidemic on the market will gradually weaken. The recovery process of cotton demand will continue, and the global supply and demand situation is optimistic. Domestic fundamentals are also improving. The cost of new cotton planting is high and production reduction is expected. Orders from downstream textile companies are expected, and the focus of cotton prices is still on the upward trend.
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