The global outbreak of the COVID-19 epidemic has led to a global economic recession, a sharp decline in consumer demand for textiles, and difficulties in operating textile manufacturing industries in various countries. In order to alleviate the downward economic pressure caused by the COVID-19 epidemic, many countries have urgently introduced vigorous economic stimulus policies. The confrontation between policy stimulus and shrinking demand will lead to continued large fluctuations in the market.
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The negative marginal effects of the epidemic are diminishing and the outlook for cotton consumption is still worrying
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China and the United States have stable cotton planting intentions and abundant cotton supply in the new year
On March 26, the National Development and Reform Commission and the Ministry of Finance jointly issued an announcement “On Improving the Target Price Policy for Xinjiang Cotton.” The announcement pointed out that in order to implement the spirit of the No. 1 Central Document in 2020, with the approval of the State Council, the cotton target price policy will be improved in Xinjiang from 2020. The target price level is 18,600 yuan per ton, which will be evaluated every three years and will be adjusted based on the evaluation results as appropriate. Target price level. A survey by the National Cotton Market Monitoring System on March 31 showed that China’s intended cotton planting area in 2020 was 45.501 million acres, a year-on-year decrease of 5.1%, of which Xinjiang’s intended cotton planting area was 34.759 million acres, a year-on-year decrease of only 1.6%.
Since April, new cotton planting has begun in the northern hemisphere. According to a report released by the United States Department of Agriculture, the intended cotton area in the United States in 2020 was 13.7 million acres, a year-on-year decrease of 1%, the upland cotton area was 13.5 million acres, a year-on-year decrease of 1%, and the Pima cotton area was 228,000 acres, a year-on-year decrease of 1%. According to statistics from the United States Department of Agriculture, as of April 6, the sowing progress of new cotton flowers in the United States was 7%, an increase of 2% compared with the same period last year and the five-year average.
Given that China and the United States, the two major cotton-producing countries, have relatively stable cotton planting intentions and global cotton consumption has shrunk significantly, it is expected that the global cotton supply will be more abundant in the new year and put great pressure on cotton prices.
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Policy stimulus versus sluggish demand Cotton price fluctuations may Continued to intensify
During the 2008 financial crisis, the lowest prices of ICE cotton futures and Zheng cotton main contracts fell to 38.45 cents/pound and 10,080 yuan/ton respectively; since the global outbreak of the epidemic this year, ICE The main contracts of cotton futures and Zheng cotton fell to as low as 48.35 cents/pound and 9935 yuan/ton respectively. From the perspective of consumer demand, the impact of the current epidemic on cotton consumption demand is greater than that of the 2008 financial crisis; from the perspective of policy, the current financial and industrial policies introduced by various countries are faster and more powerful than during the 2008 financial crisis. From this level of analysis, the current epidemic will not necessarily cause ICE cotton futures to fall to the lows of 2008. The confrontation between vigorous economic stimulus policies and consumer demand that cannot return to normal in the short term will lead to continued large fluctuations in the market. This kind of fluctuation will be particularly severe during the important window period of cotton production.
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Domestic cotton production, sales and inventory forecast
Production and demand for this period It is predicted that consumption in 2019/20 will be reduced by 100,000 tons to 7.0336 million tons, and the ending inventory will be increased by 100,000 tons to 6.2054 million tons accordingly.
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