On May 6, Zheng cotton futures rose significantly in early trading. Subsequently, the WeChat group forwarded the “Statement on the Indefinite Suspension of All Activities under the China-Australia Strategic Economic Dialogue Mechanism” issued by the National Development and Reform Commission. From now on, indefinitely All activities under the China-Australia Strategic Economic Dialogue mechanism jointly led by the National Development and Reform Commission and relevant departments of the Australian federal government will be suspended for the period.
The author observes that the market has been hotly discussing this, and the commodity market is also very sensitive. Both black series and rebar have experienced very large increases. In comparison, , the growth rate of cotton is much lower. Of course, this has a lot to do with the volume of Australian exports to China.
Affected by weather, Australia’s annual production varies greatly. According to USDA forecasts, the output for three consecutive years from 2018 to 2020 will be 479,000 tons, 137,000 tons and 566,000 tons respectively, and the export volume will also fluctuate greatly. Due to the limited output, it will not affect the global cotton supply balance.
According to USDA export forecast data, Australia’s export volumes for three consecutive years from 2018 to 2020 were 791,000 tons, 296,000 tons and 305,000 tons respectively. In the first two years, China imported 380,000 tons and 157,000 tons of Australian cotton respectively, accounting for almost half of its exports. As economic and trade activities between the two countries have cooled down in the past two years, Chinese buyers’ interest in Australian cotton has gradually declined. The latest data shows that from September 2020 to February 2021, China imported only 37,000 tons of Australian cotton (half a year).
Therefore, the author believes that under the premise of such a small import volume, the economic and trade activities between the two countries continue to cool down, and the impact on the domestic cotton market will be very limited. The large increase in the market is still related to the recent decline in the number of confirmed cases of the epidemic in Europe and the United States and the gradual relaxation of epidemic prevention measures. The market should not expect to push up cotton prices through excessive speculation on related events. The key lies in the strength of consumption recovery. </p