Market Dynamics: Overall Supply Exceeds Demand In The Domestic Cotton And Cotton Yarn Market

Last week, the center of gravity of domestic cotton prices moved downward, while international cotton prices were consolidated in a narrow range; Cotton yarn prices at home and abroad continued to fall; The price of domestic polyester staple fiber has turned from up to down.

The sale of domestic seed cotton entered the final stage, and the purchase price was reduced. Customs data show that cotton imports last month hit a new high in the year, bringing greater pressure on domestic new cotton prices. The downstream cotton yarn market is becoming more and more depressed. Textile mills cut prices to speed up the return of funds, but the effect is not ideal. On November 21, the main contract price of Zheng Mian fell sharply and hit a new half year low, and the spot price weakened. On November 20-24, the average settlement price of the main contract of Zhengzhou cotton futures was 15372 yuan/ton, down 344 yuan/ton from the previous week, or 2.2%; The national cotton price B index, which represents the market price of standard lint in the mainland, averaged 16634 yuan/ton, down 200 yuan/ton or 1.2% from the previous week.

The picking progress of American new cotton has accelerated, and the market demand has not changed. Last week, the contracted volume of American cotton decreased slightly. The market transactions around Thanksgiving were relatively flat, and the international cotton price was under pressure. From November 20 to 24, the average settlement price of ICE cotton futures main contract was 80.81 cents/pound, up 0.01 cents/pound or 0.2% from the previous week; The international cotton index (M), representing the average landed price of imported cotton in China's main ports, averaged 91.06 cents/pound, up 0.64 cents/pound or 0.7% from the previous week; Converted into RMB, the import cost is 15867 yuan/ton (calculated by 1% tariff, excluding port miscellaneous and freight), up 112 yuan/ton or 0.7% from the previous week. The domestic cotton price is 767 yuan/ton higher than the international cotton price, and the price difference is 312 yuan/ton smaller than the previous week.

Domestic textile mills reported that the orders were less than those in the first ten days of this month, and mainly short orders. With the decline of cotton spot and futures prices, cotton mills, fabric mills and garment factories have more serious pressure on cotton yarn prices, and the decline of domestic cotton yarn prices has expanded. The production and sales of cotton mills in Pakistan and other countries are not smooth, the operating rate continues to decline, and the international cotton yarn price has declined slightly. At present, the average price of conventional outer yarn is 874 yuan/ton lower than that of domestic yarn. Gray cloth market sales are light, and the price of all cotton cloth has decreased continuously. In addition, the price of polyester staple fiber turned from up to down.

Global cotton picking has accelerated and demand has recovered slowly. The minutes of the Federal Reserve's November monetary policy meeting showed that the target range of the federal funds rate would remain unchanged. Market analysis believes that although it cannot be completely ruled out whether there will be another interest rate increase in the future, inflation and employment market data have improved continuously, indicating that the probability of the end of the interest rate increase cycle of the Federal Reserve is high. In terms of the cotton market, the global cotton supply is sufficient in 2023/24. According to the data of the US Department of Agriculture, as of November 19, the US cotton harvest progress was 77%, a year-on-year decrease of 1 percentage point, and an increase of 6 percentage points over the average of the past five years. According to the statistics of Pakistan Ginning Factory Association, as of November 15, Pakistan's new cotton market volume in 2023/24 has reached 1.25 million tons. In the international textile market, with the arrival of the American holiday, residents' consumption showed signs of marginal improvement, and the inventory of major brand retailers declined. The destocking may end in the fourth quarter. According to the data of the US Department of Commerce, the retail sales of clothing stores in the US in October reached 26.11 billion US dollars, up 0.8% year on year. In general, the expected warming of the Federal Reserve's end of interest rate hikes is conducive to the improvement of the economic environment. Under the influence of factors such as the gradual increase of global cotton supply and cotton enterprises' choice of opportunities to supplement stocks, it is expected that the international cotton price will fluctuate around 80 cents per pound.

The supply and demand of cotton yarn is loose, and the cotton price is expected to be weak. The sale of domestic seed cotton has entered the final stage, and the cotton processing progress has been greatly accelerated, but the sales are not smooth. According to the data of the national cotton market monitoring system, as of November 23, the national cotton sales rate was 93.4%, down 1.5 percentage points year on year; The cumulative processing lint was 3.225 million tons, an increase of 826000 tons on a year-on-year basis; The cumulative sales of lint were 242000 tons, a year-on-year decrease of 83000 tons. According to customs data, in October, China imported 290000 tons of cotton, an increase of 1.2 times over the same period last year, hitting a new high in the year, and the pressure on the supply side of the short-term cotton market increased. In the downstream textile market, it is more difficult for textile mills to link up subsequent orders, the shipment of finished products is slow, the start-up rate of small and medium-sized textile mills in the mainland has increased, the capital flow of enterprises has tightened, and the uncertainty of cotton procurement is also increasing. In October, the import of cotton yarn was 170000 tons, up 1.6 times year on year. The recent appreciation of the RMB exchange rate against the US dollar is also conducive to the import of cotton yarn, and the substitution of domestic yarn will be further strengthened. On the whole, the current domestic cotton and cotton yarn market is generally oversupply, and it is expected that the domestic cotton price will continue to be weak.