American Cotton May Show Its Skills Again After The Epidemic

 

According to the latest monthly report of USDA, the output and export volume of Brazilian cotton in 2019/20 were 2.765 million tons and 1.938 million tons respectively, of which the export volume increased by 628000 tons compared with 2018/19, with a year-on-year growth rate of 47.94%. Brazil's main export markets are Southeast Asia, China and Bangladesh.

 

According to the statistics of Australia's authoritative industry institutions, by the end of December 2019, the cumulative export volume of Australian cotton in this year has reached 1.88 million bales, of which 1.26 million bales were exported to China, accounting for 67.02% (in December, China's import volume of Australian cotton accounted for 77% of the total export volume of Australian cotton in that month); The second is Indonesia (147100 packages). Therefore, although the quotation of Australian cotton in 2019 is "extremely high" due to the "half cut" of its output, the Chinese buyers' inquiry and contract purchase have not been affected much. On the one hand, some Chinese textile enterprises and garment factories are rigid consumers of Australian cotton due to the demand of orders; On the other hand, high-quality Australian cotton such as SM 1-5/32 and SM 1-3/16 can partially replace long staple cotton in spinning, which is conducive to reducing raw material costs for cotton mills. In addition, in January, some cotton mills and traders signed contracts to purchase at least 30000 tons of Indian cotton (using the quota of 2019).

 

According to the above situation, it is judged that China's "market-oriented" imports of American cotton in 2020 will be concentrated before August. From August to December, Australian cotton, Brazilian cotton, Indian cotton and other cotton exports and shipments in turn will have a great impact on American cotton.

 

First, although the cumulative export volume of American cotton reached 86% of the annual export volume predicted by USDA as of February 6, a large part of resources are concentrated in the hands of international cotton merchants and export enterprises, and American cotton still has a large space to choose from;

 

Second, with the inflection point of the epidemic in China and its momentum being curbed, from the perspective of time, the import of agricultural products (including cotton) from February to July will be carried out on a large scale, so as to avoid pressure from the United States to break the contract as far as possible;

 

Third, the central bank has continuously released liquidity, and textile enterprises and traders are not short of money. In order to cope with the epidemic, ease the pressure on the capital flow of small and medium-sized enterprises, and stimulate the rapid stabilization and rebound of the economy, the central bank has recently opened the gate to release more than 2 trillion yuan of water, and enterprises have sufficient resources to purchase raw materials;

 

Fourthly, by comparison, the short-term performance price ratio of American cotton is on the high side. According to the survey, in the first half of February, EMOT 41-4、 The quotation of 42-4, ME 41-3 and ME 42-4 is 6-7 cents/pound lower than that of M 1-1/8 Brazilian cotton. Once the additional tariff is cancelled or greatly reduced, the competitiveness of American cotton is significantly higher than that of Brazilian cotton, West African cotton, Ukrainian cotton, etc;

 

Fifthly, the number of American cotton shipments and bonded goods is large, and the buyer has sufficient space to choose. For textile enterprises, the supply of American cotton is large, the quality is stable, and the difference between batches is small, which is conducive to the cotton distribution in the receiving workshop, the cotton yarn quality is stable, and the medium and long term orders. Therefore, in the past of the epidemic, Chinese textile and clothing orders are expected to have a blowout, and American cotton may show its talents again.