According to statistics from the United States Department of Agriculture, in the week of November 1-7, 2019, the United States net contracted 78,300 tons of upland cotton for the 2019/20 season, an increase of 109.8% from last week. The main contracting countries were Pakistan (26,500 tons ), China (18,900 tons) and Turkey (10,400 tons). China accounted for 24.14% of the total contracted volume of upland cotton in the United States in 2019/20 that week; from 1,126 tons and 5,330 tons in the previous two weeks, it suddenly increased to 18,900 tons. , the magnitude is not surprising.
As of November 7, the cumulative contracted exports of U.S. upland cotton in 2019/20 were 2.2439 million tons. An increase of 6.3% compared with the same period last year, completing 64% of this year’s forecast. Both the export volume and export progress are much higher than the average of the past five years.
Judging from feedback from several international cotton merchants, import trading companies, and textile companies, China’s large number of contracts for 2019/20 U.S. cotton in the first week of November completely exceeded expectations. , after all, compared with Pakistan’s 2019/20 cotton production and quality decline, and Turkey, Vietnam and other countries are “non-cotton-producing countries, completely dependent on imports”, China’s cotton initial inventory in 2019/20 is higher, cotton production and quality are relatively stable, and it will take “time” for cotton consumption to stabilize and recover; more importantly, although China-US trade negotiations have made some progress, the first phase agreement has not been signed, and it is a bit early for companies to start “market-oriented” purchases of US cotton. Care needs to be taken to avoid risks.
The author analyzed that the reasons why Chinese buyers signed a large number of US cotton contracts from November 1st to 7th are summarized as follows (not discussing the RMB exchange rate):
First, there is a strong expectation that China and the United States will sign a phased agreement before the end of December and mutually cancel additional tariffs. Of course, in order to avoid risks, most procurement contracts clearly stipulate that “if the increased tariffs on imported US cotton are not cancelled, the buyer and seller will negotiate to delay performance, unconditionally terminate the contract or even break the contract.” Therefore, the actual shipment and delivery quantity are variables that may be adjusted at any time;
Second, considering the shipping schedule of US cotton in 2019/20, a small number of Chinese cotton textile mills have “overdrawn” the 2020 1% import quota within the tariff and “pre-purchased” high-quality machine-picked cotton. Shipment and delivery generally take place from January to March 2020;
Thirdly, as the Sino-US trade war eases and mutual delays in raising tariffs occur, some textile and clothing orders from developed countries such as Europe and the United States have fallen. Or return from Southeast Asia, and the contract requires the use of “US cotton or Australian cotton”;
Fourthly, starting from December 2, China has started to import 500,000 tons of medium and high-quality Xinjiang cotton. Traders and textile companies are worried that the domestic supply of high-quality machine-picked cotton will be tight and cotton prices will rise in 2019/20, and they have plans to sign contracts to lock in SM and GM grade US cotton resources in advance. </p
