Trends: US Department Of Agriculture Released Cotton Production And Demand Forecast Is Obviously Negative

According to the global production and demand forecast released by the U.S. Department of agriculture in October, there are obviously two disadvantages:

First, the US cotton production in 2022 / 2023 was lowered to 13.81 million bales, which was 21.2% lower than the previous year's 17.52 million bales, and also lower than the 13.83 million bales estimated last month, but the month on month decrease was less than 1%.

Second, the demand continued to decline, and the global cotton consumption decreased by 3 million bales on a month on month basis, including the revision of China's cotton consumption historical data since 2019 / 2020. Among them, the adjustment range in 2021 / 2022 was the largest, with a decrease of 2 million bales on a month on month basis, and the consumption of India was also reduced by 1 million bales, Pakistan's consumption was cut by 500000 bags. Consumption also decreased in Turkey, Mexico and Vietnam.

From the perspective of supply and demand gap, the global surplus of 2.45 million bales changed the tight balance between supply and demand reported in September. According to the historical supply and demand situation in the past, the surplus lasted at least 9 months, and the late supply and demand report of the United States Department of agriculture continued to be negative for cotton.

Fund position changes in ice cotton, and futures prices have a high correlation. After the release of the supply and demand report in August, the fund believed that the reduction of cotton production in the United States would help the price rise, and began to add more cotton orders. However, it was later found that the growth of American cotton was not too bad, and the later report was likely to increase cotton production, so the fund began to reduce warehouse and multiple orders continuously. As of last week, it has reduced net multiple orders for five consecutive weeks, and futures prices have also fallen. From the current point of view, the fund has no signs of increasing orders, if the latter continues to reduce holdings, then ice cotton prices are likely to fall below 81 cents / pound.

Cotton is now in the stage of new cotton listing and cotton supply increasing, while the demand is reduced by the macro situation, global interest rate increase and other factors, and the traditional domestic "gold nine silver ten" has not appeared. In addition, affected by epidemic factors, the futures price and the cost price ratio of new cotton have no absolute advantage, so it is difficult to rebound, and it is expected to be sorted out later.