Monthly Report: The New Cotton Enters the Market Centrally, the Supply is Relatively Sufficient (Nov.2020)

In November, the national cotton picking basically finished, the harvest progress was faster than the same period last year, seed cotton purchase price increased slightly month-on-month, year-on-year increase is still large. New cotton processing progress continues to accelerate, lint  enters the market centrally, relatively abundant supply, commercial inventory increased substantially. Textile market into the off-season, orders weaker than the early, enterprises to buy raw materials on demand, cotton demand is weak. Influenced by external factors such as market optimism driven by the progress of Covid-19 vaccine, cotton prices at home and abroad rose, with the increase of foreign cotton greater than that of domestic cotton, and the difference between domestic and foreign cotton prices narrowed to some extent.

1. The Cotton Harvest is Over and the Production Remains Stable

In 2020, the cotton area in Xinjiang will decrease, but the yield per unit area will continue to increase, and the yield will be basically stable. According to the statistics of CCA, the national cotton area in 2020 is about 45.97 million mu, 4.5% less than that of last year, and the total production is 5.923 million tons, 0.3% more than that of last year. Xinjiang's production was 5.244 million tons, up 4.1% year on year, accounting for more than 88% of the national total. The production of the inland continued to shrink, with the production of the Yellow River basin and the Yangtze River basin reaching 396,000 tons and 248,000 tons respectively, down 15.3 percent and 31.1 percent year-on-year.

2. The Acquisition Price is High, and the Quality has Declined Significantly

In November, the national seed cotton acquisition has come to an end, the processing progress is faster than last year, the purchase price increased significantly. As of November 30, the national 400 type cotton processing enterprises 3128 grade seed cotton purchase average price is 6.69 yuan/kg, 21.64% year-on-year increase, 2.76% month-on-month increase; The total amount of lint processing was about 3,751,200 tons, an increase of 7.51% year-on-year.

3. Domestic Cotton Prices Rose Slightly, Internal and External Cotton Prices Narrowed

In November, the domestic and international cotton prices fluctuated and the domestic increase was smaller than the international price, and the price gap between domestic and foreign cotton narrowed. At the end of the month, the average monthly price of the CC Index 3128B was 14,533 yuan/ton, an increase of 580 yuan from the previous month and a year-on-year increase of 1,473 yuan. China's imported cotton price index FC Index M was 79.17 cents per pound each month, up 2.7 cents from the previous month and 3.56 cents from the same period last year. At the end of the month, it was 81.76 US cents/lb, higher than 4.81 US cents/lb at the end of the previous month. The 1% tariff was discounted to RMB 13,452/ton. The price difference between inside and outside cotton was RMB 1,199/ton, which was RMB 524 less than the end of the previous month.

4. Business Inventories Rose Sharply

New cotton enters to the market brings a substantial increase in commercial inventory.  Xinjiang cotton inventory increased significantly, the inland due to the decline in orders from textile enterprises, raw material procurement enthusiasm, inventory decline slowed down. At the end of the month, China's cotton commercial inventory totaled 4.5707 million tons, up 43.19% from the previous month and 1.65% from the same period last year. Xinjiang shipments into the peak, shipping volume increased significantly. By the end of November, Xinjiang's specialized cotton warehouses had shipped 321,600 tons of cotton out of Xinjiang, an increase of 102,300 tons month-on-month and 75,900 tons lower than the same period last year.

5. The Textile Market Demand Weakens, the Inventory Increases Slightly

Textile market into the off-season, enterprises as needed to fill the warehouse, cotton demand fell. Yarn production fell 0.3% month-on-month and 1.1% year-on-year in November. Cloth output rose 1.2% from the previous month and 0.9% from the same period last year. At the end of the month, the inventory of cotton industry of textile enterprises was 727,700 tons, an increase of 0.6,500 tons compared with the end of last month and an increase of 0.4,500 tons year-on-year.

China Cotton Supply and Demand Balance Sheet (Dec. 2020)      Million tons