Compared to last year, despite the current cotton prices were low shock range, but the basic changes little, on the surface of the basic flat or slightly fluctuations with last year, the production of reserve round out the schedule later fell to relatively low, cotton fundamentals still overall positive, but compared with the prior year is also true that there are some factors changed, mainly is the market consumption and import the desired change.
There is limited room for consumption to fall
Strong growth of cotton consumption has been supporting one of the main factors of the price of cotton in recent years, but after entering 2018-2019 macro-economic downward pressure that makes the market's expectations of consumption changed, expects this year's cotton consumption is likely to change since the 2015-2016 year began to continue rapid growth momentum to run down.
Indeed, since the beginning of 2018, the retail sales of textile and clothing have been on a continuous downward trend. However, when the external factors start to reflect the reality and the export sales of textile and clothing in November and December 2018 also show a significant year-on-year decline, the market's expectation of future cotton consumption is disturbed.The impact of the macro economy on consumption is obvious, but the consumption decline caused by the economic downturn should be slow. In contrast, the impact of external factors will be more rapid and direct, especially when the market sentiment is generally pessimistic.Although China's textile and clothing exports are indeed large, but combined with the overall export and domestic sales data, the proportion is still limited.Moreover, although the textile and garment industry in southeast Asia has developed rapidly in recent years, China still has irreplaceable competitiveness in terms of both volume and cost in this industry. In other words, even if external disturbances persist, the global relocation of industrial resources will take time.So consumption is likely to fall in 2018-19, but there is limited room for it to fall.
The price centre of gravity is expected to move up
And another expected change factor is imported, because our country implements is the import quotas for cotton, so in recent years, domestic cotton imports steadily in 1 million tons, up and down but for stable cotton prices down last year 800000 tons of sliding tax quota and quasi lower tax rate that makes the market forecast this year cotton imports reached 1.6 million tons.Against the backdrop of declining consumption, the sharp increase in cotton imports will largely offset the gap between supply and demand of the core support factors for cotton prices.
Under the background of the normalized gap of domestic cotton production and sales and the continuous decline of state reserve inventory, the increase of cotton import volume is inevitable.However, the increase of import quota this year is an emergency response to specific circumstances, especially when cotton stocks are still relatively sufficient and new cotton starts to come to market in large quantities, which further expands the short-term supply pressure of cotton.But combined with global supply and demand, supply pressures on imports are likely to remain above expectations.The global cotton supply situation in 2018-2019 is not very good. Firstly, due to the weather in the United States, there is a significant decline in both cotton production and quality.In India, despite a lack of data from the U.S. department of agriculture, domestic cotton production has been cut to below 5.7 million tons this year, and prices remain high due to its own good stocks and MSP support.In addition, due to the drought, the market estimate for Australia's cotton production has been adjusted to around half a million tons;Brazil's cotton production may be an important supplement to global cotton supplies this year, but its cotton exports are nearing the end of the year.Therefore, in terms of cotton resources available on a global scale, despite the increase in domestic cotton import quotas, there are still great doubts about the implementation of the actual cotton procurement.
On the whole, the decline of cotton consumption is an objective fact under the background of both domestic demand and foreign trade pressure, but the extent is still controllable.On the other hand, the increase in imports is also a trend, but in the light of global cotton supply and demand, the increase in the internal and external cotton density is likely to become another strong support for its price.In addition, the existing industrial and commercial inventory and warehouse receipt pressure are more phased. Combined with the cotton supply and demand situation of the whole year, cotton is still the destocking logic, while the continuous decline of the state reserve inventory gives more variable space for the cotton price.Therefore, short-term cotton prices could remain periodic low dominated supply pressure and pessimistic consumer expectations, but as the market sentiment improved and orders, cotton prices may be expected to return to their normal logic of supply and demand, the price of center of gravity should be up, crop planting, weather conditions, the store policy, structural factors such as supply can also be a new impetus.