Industry Observation: Pay Attention To The Dynamic Trend Of Global Cotton Market Analysis

　　 Global new cotton production is still uncertain, and weather changes need close attention.

This year, cotton planting in the northern hemisphere is smooth and growing well, and the market has a strong expectation of global cotton production increase. At present, cotton picking is still about a month away, and the weather change and its impact on cotton yield during this period need close attention. According to the prediction of the U.S. Department of Agriculture in August, the global cotton output in 2024/25 will be 25.61 million tons, an increase of 880000 tons year on year; The cotton consumption was 25.3 million tons, an increase of 840000 tons year on year. Since August, the drought situation in Mississippi and other places in the United States has worsened. The water level of reservoirs in western Texas has been lower than normal, and the drought rate in American cotton production areas has increased, which may lead to higher yield of abandoned cotton. By the week of August 20, about 30% of the cotton producing areas in the United States had been affected by drought, an increase of 8 percentage points over the previous week.

According to the survey of the United States Department of Agriculture, in 2024, the sown area of cotton in the United States will be reduced from 70.84 million mu to 67.81 million mu, and the harvested area will be reduced from 58.7 million mu to 52.39 million mu. According to the data of the Ministry of Agriculture of India, as of the beginning of August, India's cotton planting area will be 162 million mu in 2024, down about 9% from the same period last year. In August, the US Department of Agriculture's supply and demand forecast reduced the cotton output of the United States and India in 2024/25. The US cotton output forecast was lowered from 3.7 million tons to 3.29 million tons, and the Indian cotton output forecast was lowered from 5.44 million tons to 5.33 million tons. In addition, the continuous rainy weather in Pakistan has also adversely affected cotton production and picking. It is expected that the progress of new cotton listing will be delayed.

　　 The macroeconomic environment has improved and the demand for textiles and clothing has stabilized.

In view of the loosening of monetary tightening policies in some western developed economies, it is necessary to be alert to the impact of financial market fluctuations and investor sentiment changes on commodity markets when liquidity is facing inflection points. Since this year, Canada and Switzerland have cut interest rates twice respectively, and Europe, Britain and Sweden have cut interest rates once respectively. The market's expectation of the Federal Reserve's interest rate cut in September has been rising.

The consumer price index (CPI) of the United States increased by 2.9% year-on-year in July, falling for the fourth consecutive month. The trend of inflation cooling was further consolidated. At the same time, retail sales in July rose 1% month on month, better than the 0.3% expected by the market, further enhancing the market's confidence in the soft landing of the United States economy. In addition, Bank of Japan Governor Yoshio Ueda said at the parliamentary hearing on August 23 that he would carefully study the impact of interest rate increase in July on the economy and prices before deciding whether to further increase interest rates. However, the basic position of monetary easing will not change, but the current interest rate is still very low. If the economy is in good condition, the interest rate level will be raised to a neutral level.

The market expects a low probability of interest rate increase in Japan in the short term, but it does not rule out the possibility of another interest rate increase in the year. Judging from the downstream textile and clothing market, the US textile and clothing inventory has returned to the normal level before the epidemic, and the market sales are basically stable. As of June, the inventory sales ratio of clothing and clothing fabrics of American wholesalers was 2.26. In July, the retail sales of American clothing and accessories stores were 26.235 billion dollars, up 2.52% year on year. In June, Japan's large-scale retail sales increased 2.64% month on month.

　 The international cotton price entered an undervalued range, and the industrial sentiment rebounded.

ICE cotton futures prices, after nearly five months of decline, are in the low value range for 20 years and have been lower than the planting cost of American cotton, so the space for further decline is limited. According to the U.S. Commodity Futures Trading Commission (CFTC), as of August 20, ICE cotton futures has 231389 total positions and 555 long net positions in commercial positions (production, trade, processing), which is the first time since 2019 that the net long position has been changed from the net short position for three consecutive weeks, indicating that the industrial capital basically recognizes that the current international cotton price has entered the undervalued range, and the probability of the international cotton price continuing to decline in depth is small.

At the same time, the managed funds held 51509 short orders that week, which was the second highest level since 2019, indicating that the current speculative short position power basically reached its peak, and the probability of profit taking from later position reduction increased.