Weekly Report: Cotton Prices Home and Broad Decline Continually against Weak Demand

Since May, cotton futures continued to move downward both at home and abroad, the Zhengzhou cotton futures decreased largely since July, especially that the major contract 1501 falling from 14,750 Yuan from 15,500 Yuan within three days, which reached the lowest since 2011 and restored to the price level of 2009. ICE cotton futures also moved from 85 cent/lb. to 72 cent/lb. in recent months. The main reason of price falling is the increase of supply and the weak demand. After three years of reserve purchasing, the heavy domestic reserve stock brought much uncertainty to the market. According to the latest statistics of USDA, the actual cotton planting acreage of US cotton increased by 9.2% over the year, and the production estimate increased for the recent rain easing the drought in Texas, at the same time US cotton export kept sluggish, resulting in larger ending stock. Indian cotton production estimate also increased which contributes to larger global supply and lowered ICE futures further.
During the month of July, cotton in most regions is in squaring or flowering stage. The weather conditions in the North is good for cotton growth, while the rain in the South caused waterlog in some fields and also impeded the flower growth in larger areas.
Last week, (30th June – 4th July) CC Index 3128B settled at 17,318 Yuan/ton by weekend, 19 Yuan down over the week. Reserve auction processed smoothly, by transaction of 62,000 tons, 1.2% less than last week. By 4th July, the total reserve cotton release had been 2.10 million tons, 24.1% of transaction percentage, including 1.98 million tons of domestic cotton and 125,000 tons of import cotton.
As for import cotton price, FC Index settled at 88.74 cent/lb., 1.91 cent down over the week.