When will inventory re-determine the direction of cotton prices?
Exclusive news from China Cotton Network: The monthly analysis of US cotton companies believes that international cotton prices have continued to rise as a whole in the past month. ICEFutures and Kotruk Index are at78cents and87Around cents. China’s spot price is stable at around16000yuan, Zheng cotton futures fluctuate greatly, and IndiaS-6from80cents rose to83cents, prices in Pakistan stable at78cents.
The USDA Agricultural Outlook Forum estimates that cotton ending stocks in 2017/18 fell for the second consecutive year, and the decline was similar to this year. This should have pushed cotton prices to continue to rise, but even if the 2015/16 and 2016 In 2017, China’s cotton reserve inventory continued to decline sharply, and the ending inventory of this year was still 50% higher than the level ten years ago. At that time, the inventory was over 60 million bales, and the Kotruk A index was 50-60 cents.
If inventories continue to decline sharply next year, the market will take a bigger step in the direction of inventory having a direct impact on cotton prices. This process may take several years, and the key lies in the inventory level in China. digestion, and whether inventories in China and elsewhere can be integrated.
This year, China’s ending stocks are estimated to have dropped from 58.2 million bales to 48.9 million bales, a decrease of 9.3 million bales, USDA Outlook Forum estimates
There will also be such a reduction in 2017/18, which requires the reserve cotton transaction rate to continue to remain at a high level. On March 6, China started a new round of reserve cotton sales and plans to continue until the end of August. If demand is strong, the reserve sale time can be extended. Like last year, reserve cotton auctions have been active so far. Almost all transactions were completed this week.
According to the forecast of the USDA Outlook Forum, inventories outside China will increase by approximately 3 million bales for the second consecutive year in 2017/18, putting pressure on cotton prices. However, judging from the price trend this year, unpredictable factors such as policies, price points and speculation will also affect the trend of cotton prices.
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