The gap between supply and demand is big! Why cotton prices have been falling, but not rising?

Since the expected mitigation of the disaster in Xinjiang in June this year, domestic cotton prices have been in a downward trend, even using the “ never raised the head ” to describe the trend. After more than five months of decline, futures prices have fallen from above 19,000 yuan/ton to below 15,000 yuan/ton today. On November 12, the main cotton 1901 contract of Zhengzhou Commodity Exchange opened at 15050 yuan/ton, and then the price jumped rapidly. The cotton price recovered part of the lost land by the tail-end pull-up. The closing price was 14850 yuan/ton, down 200 yuan/ton or 1.33%. The price of 14670 yuan/ton created in the market is the lowest price since January this year. As the dollar continues to appreciate and downstream consumers continue to slump, the decline in cotton seems to have no signs of stabilization.



The downturn in cotton prices is not just seen in China, but global cotton prices are also lingering low. On Nov. 12, cotton on the Intercontinental Exchange (ICE) fell nearly 2% due to the surge in the US dollar. The most active March cotton price fell 1.6 cents to 78.30 cents/pound, or 1.95%. The strength of the US dollar makes the price of commodities denominated in US dollars more expensive (purchased in other currencies), while most international cotton is denominated in US dollars. After repeated unsuccessful attacks, investors'bullish sentiment has also been hit repeatedly. According to weekly positioning data released by the Commodity Futures Trading Commission (CFTC) on Friday (November 9), speculators reduced their net holdings of cotton futures options by 1519 to 22972 hands in the week ending November 6, the lowest since the end of August 2017. .



Seeing the continued weakness of cotton prices, many people may not know that cotton has been in a situation of supply less than demand in the past three years. US Department of Agriculture (USDA) data released in October showed that the global cotton output in 2018 is estimated to be 26.488 million tons, a decrease of 68,000 tons compared with the same period last year; demand is 27.816 million tons, a decrease of 40,000 tons compared with the same period last year; the gap between production and demand is 1.328 million tons, an increase of 28,000 tons compared with the same period last year; the global cotton supply is smaller than demand for three consecutive years, or will continue to the same period. Four years. According to relevant forecasts, China's cotton output in 2018/2019 is 5.987 million tons, preliminary forecast demand is 9.253 million tons, the gap is more than 3 million tons. A small part of the gap will be supplemented by imports after the continued auctioning of State Cotton storage. The rotation auction in 2018 has been completed, with a total turnover of 25102.79 million tons. In recent years, domestic cotton stocks have dropped sharply. In November, the weekly cotton inventory report released by USDA also showed a downward trend.



From the spot supply and demand and inventory progress, may not support cotton prices continue to decline significantly. At present, the main reasons for suppressing cotton prices are the low enthusiasm of downstream enterprises in purchasing and the low spot sales. Influenced by the overall economic situation, the downstream enterprises are not enthusiastic about purchasing, or use old cotton or buy with production. According to relevant tests, by the end of October, commercial cotton stock had increased by 29.774 million tons; 38.46% year-on-year, 78.52% year-on-year; pure cotton yarn enterprise stock level was 23.8 days, 3.3 days year-on-year, 5.5 days year-on-year increase; As of the end of September, the cotton industry inventory of 924 thousand and 700 tons, an increase of 10.61% over the same period, an increase of 4.34%. This year cotton yarn futures prices are also the same as cotton trend downturn, new low, 13 day intraday drop nearly 3%. In addition, a large number of national cotton storage rotation auctions, adverse expectations caused by trade frictions, import quotas of 800,000 in June and other factors are also the reasons for the current decline in cotton.



How does the cotton market price go? The strong US dollar has caused the global downturn of the international commodity market. Without the special imbalance between supply and demand, cotton prices can hardly perform well. However, from the point of view of supply and demand and inventory, cotton prices have a certain basis for rising. Once the general environment improves, it may be able to break through the current downturn.



But for the overall textile market, the first three quarters of the whole run smoothly:



Looking forward to the whole year, China's textile industry is expected to maintain stable operation under the support of domestic consumption and transformation, but external pressures such as cost and environmental protection still need to be overcome.



In the same period, the sales of textile and apparel products in China were better than the previous year. From January to September, the retail sales of apparel, shoes, hats and knitted textiles above the national quota increased by nearly 9% year on year. The growth rate was 1.7 percentage points higher than that of the same period last year, which was at a higher growth level in the past three years.



In addition, the export market has continued to warm up. In terms of export markets, textile and apparel exports to the United States, the European Union and Japan increased year on year.



It is predicted that China's textile industry will continue the current stable trend in the whole year 2018, and the main operating indicators will basically maintain the current growth level.



In 2019, China's textile industry is facing a stable and changing market environment at home and abroad. The operating pressure of the textile industry will increase compared with this year. The uncertainty of the export situation will increase. The internal demand of the industry to promote high-quality development is more urgent.