According to the USDA report, China signed contracts to import 2020/21 American upland cotton in the four weeks from October 16, 2020 to November 12, 2020. They were 18,500 tons, 10,700 tons, 70,530 tons, 00,000 tons (the quantities of U.S. cotton shipped to China during the same period were 23,500 tons, 28,900 tons, 23,500 tons, and 30,500 tons respectively, showing relatively strong performance), showing a linear and rapid decline. Some U.S. cotton exporters and international cotton merchants I feel a little confused and unprepared.
According to analysis by industry insiders, on the one hand, compared with Brazilian cotton cargoes and bonded cotton in 2020, the increase in the basis difference of US cotton in the past month has been significantly weaker than that of Brazilian cotton, and the price difference between the two has continued to narrow. On the other hand, the RMB has appreciated sharply recently, and the cost of imports of U.S. cotton and other products has dropped significantly. According to statistics, both the offshore RMB exchange rate and the central parity rate of RMB against the US dollar have hit a new high since June 2018. In 118 trading days, the RMB rose by more than 5,500 points, an increase of more than 8%. In addition, what is more noteworthy is that in the two weeks of October 23-29 and November 6-12, China canceled the 2020/21 annual US cotton contract of 86.86 million tons and 54.88 million tons respectively. Chinese buyers have seen a sharp decline in new U.S. cotton contracts while simultaneously canceling a large number of U.S. cotton contracts. This can be described as a “two-pronged approach” and market concerns are gradually rising.
Why has China not only “suddenly stopped” signing contracts to purchase US cotton in 2020/21 but also canceled a relatively large number of contracts in the past month? The author’s judgment may be caused by the following factors:
First, affected by the US presidential election, the direction of Sino-US relations is full of uncertainty, the implementation of the first phase of the Sino-US trade agreement, the Xinjiang cotton situation at the end of November Whether a comprehensive import ban will be implemented has given Chinese companies a strong wait-and-see atmosphere; second, affected by successive hurricanes and tropical storms in 2020, cotton output, grade and quality indicators in the southeastern cotton region, Texas, and Delta of the United States may be very unsatisfactory. , Chinese buyers are increasingly worried about the mismatch between supply and demand of U.S. cotton, and have taken measures to postpone signing contracts and purchase hedging; thirdly, judging from the statistical caliber of all parties, China’s cumulative contracted volume of U.S. cotton imports in 2020 may be close to the first phase of Sino-U.S. With the trade agreement offline, considering that the second and third waves of the COVID-19 epidemic have broken out one after another and the US cotton basis gap is still relatively strong, buyers have taken the initiative to “downgrade and slow down” when placing orders; fourth, since late October, Zheng cotton, domestic The spot price of cotton has fallen sharply, and the competitiveness of domestic cotton and foreign cotton cleared at ports has increased. </p
