The Cotton Market Is Expected To Be Better Than Expected Due To The Rise Of The US Consumer Price Index (CPI)

Both the cotton market and the external market related to the release of important data have been affected. The main stock indexes gained support before the weekend. The US consumer price index (CPI) rose 0.6% month on month in August, the largest increase since 2023. Producer price index (PPI) also exceeded expectations, rising 0.7% month on month, higher than analysts' expectations of 0.4%. The higher than expected retail sales data released by the United States on Thursday boosted the cotton market.

Retail sales rose 0.6% month on month in August, higher than the expected 0.1%. Clothing sales increased by 0.9% in August. The US job market continued to show resilience, with 220000 people applying for unemployment benefits this week, lower than expected. The US dollar responded positively to the economic data, hitting a six-month high over the weekend. Crude oil prices continued to rise, hitting a 10 month high, due to concerns about tight inventories and speculation about increased demand in China.

The Federal Open Market Committee (FOMC) will meet next Tuesday and Wednesday. The strong economic data released almost consolidated the view that the Federal Reserve will keep interest rates unchanged at the upcoming meeting.

　 Monthly supply and demand data

WASDE report was released on Tuesday. As expected, the USDA will cut the cotton output by 860000 bales to 13.13 million bales in 2023/24. The export volume was also reduced by 200000 bales to 12.3 million bales. The inventory at the end of the period decreased by 100000 to 3 million packages. Domestic consumption remained unchanged at 2.15 million packets. It is worth noting that the inventory at the end of 2022/23 will increase by 550000 packages; Therefore, the initial inventory of 2023/24 will increase by 550000 bales to 4.25 million bales.

The overall production decline is distributed in several states, but the largest reduction occurs in the southeast region. Due to the decrease of Oklahoma and Kansas, the southwest also declined in general. The output of Texas highlands remained unchanged at 4.2 million bales, but the output of Oklahoma decreased by half to 260000 bales, and that of Kansas decreased by 123000 bales to 127000 bales. At present, the total output of land cotton in southwest China is estimated to be 4.587 million bales.

Global cotton production decreased by 1.73 million bales to 112.39 million bales. Nearly 1/3 of them came from India, and the output decreased by 500000 bales. Global cotton consumption decreased by 1.06 million bales to 115.88 million bales. These changes brought the world's ending inventory to 89.96 million packages, with an overall decrease of 1.64 million packages.

　　 Export sales data

The export sales report released by the U.S. Department of Agriculture on Thursday showed that demand for American cotton remained tepid in the week ending September 7. In the current year, the net export sales of American cotton increased by 67400 bales, 21% less than the previous week, and 27% less than the average of the previous four weeks.

The largest buyer of upland cotton this week was 25900 bales from Vietnam, followed by 25200 bales from Mexico, 17500 bales from China, 15200 bales from Bangladesh, and 6100 bales from Indonesia. The export shipment of American cotton was 118200 bales, 33% less than the previous week and 41% less than the average of the previous four weeks, including 58600 bales exported to China.

　　 Weather and crop growth rating

This week, a cold front swept southwest China, bringing lower than average temperatures and sporadic storms. Rainwater will do little to help dryland crops, but areas that irrigate cotton may benefit. Although drought conditions have become common in recent weeks, this rain will help replenish some water.

Sporadic storms and below average temperatures are expected in the coming week. The U.S. Department of Agriculture announced in its weekly crop growth report that as of the week of September 10, the excellent rate of American cotton was 29%, 31% the previous week and 33% the same period last year. The harvest rate of American cotton was 8%, compared with 8% in the same period last year, and the five-year average was 7%.