What will be the trend of cotton prices in the next stage of the textile industry chain under pressure?

Release time:

2022-09-26

After the Mid-Autumn Festival, the pressure on the international market continued to increase. Under the influence of unfavorable factors such as the continuous record high of the US dollar, the higher-than-expected inflation in the United States, the increase in cotton supply and the decline in demand, the main ICE cotton futures contract fell below 100 cents in December, further opening up the downward exploration space, and the trend of technical graphics further deteriorated. Judging from the situation in previous years, with the approach of the listing of new cotton, it was often the stage of market bottoming in the past. This year's situation seems to be clearer. The macroeconomic superposition fundamentals have weakened, and the market decline is inevitable.
In fact, the biggest incentive for this decline is still U.S. inflation and the rise in expectations of a Fed rate hike. On Tuesday and Wednesday (September 20-21), the Federal Reserve will hold its monthly interest rate meeting. Due to the unexpected rise in the U.S. CPI in August, and Powell has repeatedly reiterated that the operation of strict control of inflation will be adhered to to the end, the market generally believes that the Fed's benchmark interest rate will be raised by another 75 basis points this time, which will cause the U.S. dollar to continuously hit new highs and affect major economies. The purchasing power of consumers triggered a large-scale sell-off of dollar-denominated commodities. As a result, the Dow Jones index fell 4% in a week, approaching a three-month low this year.
In the context of the continued macroeconomic contraction, the situation of cotton terminal consumption and how? Recently, the United States terminal retail inventory is abundant, the decline in demand is still a lot of reports, which is very consistent with the early global factory start-up news, but also indicates that the downstream forward orders to see a reduction. Foreign analysis institutions believe that for the textile industry chain, this year's "winter" has already arrived. In the later period, with the consumption of inventory, production will gradually recover, but the overall replenishment of the supply chain may have to wait until the first half of next year. Before the textile industry inventory pressure is resolved, cotton prices are difficult to rise sharply.
Last week, the USDA finally reissued the US cotton export data that had been delayed for several weeks. Judging from the total amount, the four-week cumulative sales of just 800000 packages are not surprising, but they are also not discouraging. The market believes that, at least from the United States cotton exports, excessive concerns about the decline in consumption is not necessary. In fact, according to statistics from the U.S. Department of Agriculture, as of now, the promised sales volume in the United States in 2022/23 has reached 8.3 million packages, and 1.45 million packages have been shipped, which is higher than the 6.65 million packages and 1.25 million packages in the same period last year. However, the September report of the U.S. Department of Agriculture predicts that the export volume of U.S. cotton this year will be 12.6 million bales, which means that the average weekly shipment volume of U.S. cotton will only need to reach 240000 bales for the rest of the year. For most of 2021/22, the weekly shipment volume of U.S. cotton will not be less than 200 thousands or 300 thousands bales. Therefore, in the case of a sharp reduction in US cotton production this year, it is relatively easy to achieve the export target of 12.6 million bales. From this point of view, the United States still has strong support for cotton prices.
The weather forecast shows that the dry and hot weather in the cotton-producing areas in the United States in the next two weeks is beneficial to the maturity and harvest of new cotton. However, the recent continuous rainfall in the cotton-producing areas in the United States has led to the occurrence of rotten bells and stiff petals in many areas. The growth space of new cotton production may be relatively limited, and the support of US cotton supply to the market will continue to exist. But if demand continues to suffer, the lack of supply is unlikely to drive prices up sharply. In addition, it should be noted that although ICE Futures has only 9.12 million packages of On-Call contracts this year (including 5.37 million packages in December), which is far lower than the 14.64 million packages in the same period last year, US cotton production this year has decreased by 4 million packages compared with the same period last year, so the role of the price at the time of contract expiration cannot be ignored.

Vietnam's textile and garment industry orders began to decline in the third quarter

Return to List

2021 European Nonwovens Industry Development Report

More information