Ministry of Agriculture and Rural Affairs: Monthly Analysis of Supply and Demand Situation of Large-scale Agricultural Products in January 2023 (Cotton-related Part)

[Features of this month] Domestic cotton prices rose month-on-month, and the price difference between domestic and foreign cotton narrowed.

[Late trend] in the domestic market, textile enterprises have started to resume production, enterprise raw material inventory and finished product inventory is low, consumption is expected to improve the situation of enterprise replenishment will be strong, short-term domestic cotton prices are expected to recover. In the international market, under the background of the obvious slowdown in global economic growth, the pattern of supply and demand of cotton is loose, and it is expected that the short-term international cotton price will be under pressure.

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(I) domestic cotton prices rose month-on-month. This month, the domestic epidemic situation gradually improved, market confidence gradually restored, textile enterprises to enhance the willingness to purchase raw materials. According to the "China Cotton Industry Inventory Survey Report" data, in early January 2023, companies preparing to purchase cotton accounted for 58%, an increase of 0.2 percentage points from the previous month and an increase of 8.0 percentage points year-on-year. In January, the average monthly price of 3128B grade cotton in China was 15226 yuan per ton, up 1.7 percent from the previous month and down 32.4 percent from the same period last year. Zheng cotton futures main contract (CF305) monthly settlement price of 14850 yuan per ton, up 7.7 percent month-on-month, down 30.5 percent year-on-year.

(II) international cotton prices were flat and slightly lower. This month, concerns about the global economic recession in the international market have increased significantly, and the United States Department of Agriculture (USDA) has significantly reduced global cotton consumption, and international cotton prices have fallen. In January, the CotlookA index (equivalent to the domestic 3128B grade cotton) averaged 100.19 cents per pound per month, down 0.8 per cent from the previous month and 24.1 per cent year-on-year.

The price difference between domestic and foreign cotton in (III) narrowed. The CotlookA index (equivalent to domestic 3128B grade cotton) is equivalent to 15384 yuan per ton, 158 yuan higher than China's cotton price index (CCIndex)3128B grade per ton, and the price difference is 537 yuan smaller than last month. The average monthly price of imported cotton price index (FCIndex) grade M (equivalent to 3128B grade cotton in China) is 99.50 cents per pound, and the after-tax price of 1% tariff is 17019 yuan per ton, which is 1793 yuan higher than the domestic price, and the price difference is 634 yuan smaller than last month. The after-tax price of 17158 yuan per ton is 1932 yuan higher than the domestic price, and the price difference is 630 yuan smaller than last month.

(IV) cotton imports decreased month-on-month, while textile and clothing exports increased month-on-month. According to customs statistics, China imported 170900 tons of cotton in December, down 4.0 percent from the previous month and up 25.4 percent from the same period last year. From January to December 2022, China imported 1.9286 million tons of cotton, a decrease of 10.1 percent from the previous year. In December, China's textile and clothing exports 25.3 billion US dollars, up 3.7 percent month-on-month and down 16.3 percent year-on-year. From January to December 2022, China's textile and clothing exports totaled US $323.569 billion billion, an increase of 2.5 percent over the previous year.

(V) spinning volume increased month-on-month and yarn prices increased month-on-month. According to data from the National Bureau of Statistics, in December, my country's yarn output was 2.579 million tons, an increase of 5.7 percent from the previous month and a year-on-year decrease of 7.5 percent. From January to December, China's yarn output was 27.191 million tons, down 6.6 from the previous year. In January, the average price of 32 pure cotton carded yarns of the main representative varieties was 23321 yuan per ton, up 2.7 percent from the previous month and down 18.9 percent from the same period last year.

Global cotton production, consumption and trade were reduced in (VI). The International Cotton Advisory Committee (ICAC) predicted in January that the global cotton output in 2022/23 would be 24.65 million tons, down 440000 tons from last month. Consumption was 23.03 million tons, down 810000 tons from last month. The trade volume was 8.66 million tons, down 720000 tons from last month. The ending inventory was reduced to 21.58 million tons, and the global inventory consumption ratio was 93.7 per cent.

(VII) expect short-term domestic cotton prices to recover, international cotton prices under pressure downward. Domestic market: after the holiday textile enterprises have started to resume production, enterprise raw material inventory and finished product inventory is low, consumption is expected to improve the situation of enterprise replenishment will be strong, the short-term domestic cotton prices are expected to recover. National cotton market monitoring data show that in early January, the average number of days of cotton inventory use of sampled enterprises was about 28.5 days, a decrease of 3.3 days compared with the same period last year and 6.3 days less than the average level of the same period in the past five years. International markets: The World Bank's "Global Economic Outlook" report released in January lowered its forecast for global economic growth in 2023 to 1.7. The United States Department of Agriculture (USDA) and the International Cotton Advisory Committee (ICAC) both significantly reduced cotton consumption in 2022/23. In the context of a significant slowdown in global economic growth, superimposed on the loose pattern of cotton supply and demand, short-term international cotton prices are expected to be under pressure downward.