Market Dynamics: It Is Expected That Cotton Will Still Be Dominated By Low Price Shocks Due To The High Inventory Level

In 2024/25, the national cotton processing enterprises processed cotton according to the requirements of the reform plan of cotton quality inspection system and carried out notarial inspection statistics. As of 24:00 on December 25, 2024, there were 23607407 bales of cotton subject to public inspection, a total of 5330764 tons, an increase of 17.30% year on year, and 5155064 tons of Xinjiang cotton subject to public inspection, an increase of 15.97% year on year; Among them, 23507770 bags of serrated fine staple cotton were inspected, 3907 bags of roller fine staple cotton were inspected, and 95730 bags of long staple cotton were inspected.

According to the national cotton production data released by the National Bureau of Statistics, the national cotton planting area in 2024 will be 42.574 million mu, an increase of 752000 mu or 1.8% over the previous year; The yield per unit area was 144.8 kg/mu, an increase of 10.4 kg/mu over the previous year, or 7.8%; The output was 6.164 million tons, an increase of 546000 tons or 9.7% over the previous year.

According to the data released by the International Cotton Advisory Committee (ICAC) in December, the global cotton production and consumption in 2024/25 decreased month on month, and the ending inventory increased slightly month on month.

It is estimated that cotton is still dominated by low level shocks

The domestic supply side remained loose, the inventory was high, the downstream orders recovered in some areas but remained light as a whole, the foreign trade side continued to bear pressure, and the future market expectations were poor. It is expected that the short-term rebound will continue to fall in a weak trend, and there is no obvious driving force.

On the whole, the pressure of loose domestic production and supply in the cotton market this year is still relatively large, but it has dropped to around 13000. Due to the reluctance of cost supporting ginners and traders to hedge short at low levels, there is some support below. It is estimated that low level shocks will still prevail in the future.

At present, the output in the southern hemisphere is expected to increase in the new year, while the high yield reduction in India in the northern hemisphere weakens the 25 year global yield expectation.

In terms of American cotton, the demand side is difficult to support the rebound of American cotton. The strong dollar and the fluctuations in the peripheral market continue to disturb the short-term trend, and it is expected to continue to maintain the shock around 70 cents.