In 22/23, the supply in the northern hemisphere was nearing the end, and the southern hemisphere began to sow. The global cotton output in 2022/23 was basically stable, which was expected to be 25.2291 million tons, the same as the previous year. In addition, India's cotton output is lower than expected, the sales are slow, and the pressure on domestic new cotton has not been fully released, which may bring supply disturbance in the first quarter of 2023.
In terms of domestic demand, downstream textile enterprises in the cotton industry are waiting to enter the stage of active replenishment, and there are generally strong expectations for the future market. Terminal consumption is at the bottom of the range. With the economic recovery in 2023, there is a large rebound space. Considering the effect and pace of overseas consumption restoration, the uncertainty factors of Q1 domestic consumption end in 23 years, and the seasonal situation of domestic consumption tendency, under optimistic circumstances, the domestic consumption end may be significantly restored in the second quarter of 2023.
In terms of external demand, overseas inflation is expected to fall back and the pace of interest rate increase is expected to slow, and consumer confidence in major clothing consumer countries will also be restored. It is expected that the 23Q2-3 US apparel inventory cycle is expected to switch to the passive destocking/active replenishment phase, when the demand for domestic textile raw materials will grow relatively significantly.
In general, the cotton supply side has been relatively stable, while the internal and external demand may usher in resonance growth in the second quarter of 2023 at the latest. It is suggested to choose an opportunity to intervene in cotton long contracts in the far month. The target price of cotton futures in 2023 is expected to rise to 18000 yuan/ton.