The price of new cotton has gradually weakened

A few days ago, news of the new flower blossoms spread across the country. The price of seed cotton in the Yellow River Basin in Shandong, Hebei and other places is 3.0 to 3.2 yuan/kg, slightly lower than last year's level. In terms of the Xinjiang fine cotton and long-staple cotton that the market is paying attention to, as of now, most areas in southern Xinjiang and northern Xinjiang have been weighed. Among them, the opening price of seed cotton in southern Xinjiang was at the first line of 6.5 yuan/kg, which was a lot lower than the price of 7.0 yuan/kg in mid-August.

A farmer in Aksu, Xinjiang, lamented: "I didn't expect this year's cotton prices to be so low!" Farmers are worried that by mid-September, the price of seed cotton will drop to below 6.0 yuan/kg when a large amount of seed cotton is listed.

In contrast to the trend of cotton prices spurt along the way at the beginning of this year, China’s cotton futures price began to rebound after reaching the high point in mid-July, and prices have fallen by 15%.

The increase in supply and weak demand are the basic logic for the weakness of cotton prices.

First of all, since the middle of July, the state reserve cotton supply has increased, and market expectations have eased, resulting in a lower turnover and transaction price. On August 8, the State Ministry of Finance issued an announcement saying that the time for storing and storing cotton will be extended from the end of August to the end of September. Basically, the convergence of time with the new flower market, the spot market for the green and yellow cotton supply and demand tensions have not eased, the State Reserve cotton transaction rate and transaction prices have dropped adjustments. At present, the transaction rate is basically stable at about 60%, which is far from the previous 100%. The transaction price is also weak. In early September, the price of 3128, the reserve price, was at about RMB 14,100/ton, and the State Reserve Bank of China This situation poses a pressure on the futures market.

Second, the output of major cotton producing countries is expected to increase, and the supply side will be repressurized. The supply and demand report of the US Department of Agriculture in August showed that the 2016/17 US cotton planting area, yield, and output are expected to rebound somewhat from the same period of last year. The increase in US cotton production is expected to be stronger and the market as a whole is under pressure. The report shows that the 2016/17 US cotton planting area is expected to be 10.02 million acres, an increase of 14.4% year-on-year; the unit production is 800 pounds/acre, an increase of 4.4% year-on-year; the output is 15.88 million bales, an increase of 23.3% year-on-year.

At the same time, the growth of cotton in each major producing area in China is good. The cotton region in the Yangtze River Valley has entered the flowering and ringing stage. The cotton bolls at the bottom of some cotton fields in the Yellow River Basin have already been boiled. In early September, sporadic picking can be sporadic. There are already a small number of seed cottons in the Kashgar and Turpan regions of Xinjiang. With the acquisition of small-scale enterprises, it is expected that the large-scale cotton opening time will be in mid-late September.

Again, from the analysis of the downstream demand side, this year's international cotton textile and apparel industry has seen no significant improvement. In the context of the economic slowdown, the overall demand for the textile and apparel industry was weak, and the overall supply of cotton yarn in the upstream was surplus.

In addition, since January of this year, the price of international cotton yarn is higher than that of domestic yarn. The price of the two yarns was once hung upside down by 800 yuan/ton. The advantage of imported yarn prices is no longer so that many customers who are accustomed to using imported yarns turn to domestic yarns. However, in this round of downward trend in prices, the price of imported yarn fell more rapidly than domestic yarn, and the price advantage of domestic yarn was lost. As of August 25, the price of cotton yarn inside and outside the market was 540 yuan/ton. Due to the high price sensitivity of downstream customers, the demand for domestic cotton yarn is not expected to be optimistic.

At present, the global economic growth rate is 2.5%, which is the lowest level in the past 40 years, and the low growth trend will continue for quite a long time. The global demand for cotton textile and garment terminals is a microcosm of the demand. Against the backdrop of weak overall demand, China’s demand for cotton textiles will be even more hurt.

From the point of view of U.S. apparel imports, U.S. clothing imports have been tepid for the past two years, and cotton clothing imports have continued to be weak. The latest data show that from January to June this year, the United States clothing import situation is not good, including cotton clothing imports from either China or China outside the country, the year-on-year growth rate has declined, respectively -2.67% and -2.63 %.

From the perspective of China's market, China's textile and apparel consumption has been sluggish for the past two years. As economic growth continues to slow, and various economic risks become obvious and real estate loans hit a new high, household income and expenditure will be severely squeezed, and the downturn in China's textile and apparel consumer end market will continue.

However, taking into account the background of the global cotton market continued to destock in 2016/17, in addition to the inventory reduction brought about by China's State Reserve Cotton deposits, the international cotton stocks consumption ratio is about 45%, which is already a normal low level. Coupled with the United States due to poor economic data led to easement of interest rate expectations to ease, the dollar weakened, led to the rise of international commodity prices including cotton. From this level of deduction, the kinetic energy and space leading the continued downward movement of the cotton market are also limited.

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