Cotton is crazy.
International cotton futures have doubled since April last year, with New York cotton trading at about 158 CENTS a pound, breaking new highs since May 2011.
Relatively, domestic cotton spot prices as a whole more stable, but also facing difficulties. As a result of downstream cotton yarn market light, cotton sales far less than in previous years. In the face of foreign high cotton prices, domestic cotton prices fall space is limited, the contradiction between high prices and low sales is difficult to resolve.
As the most common natural fiber in the production of clothing, the "crazy cotton price" is bound to be transmitted to the downstream clothing industry. With summer just around the corner and T-shirt sales at their peak, how much will this year's T-shirt prices be affected?
Us cotton prices have tripled in two years
International cotton prices have been rising for some time.
Soaring from a low of 50 cents a pound in April 2020, cotton futures in New York have nearly tripled in two years and are now hovering at 145 cents a pound, up about 30 percent since the end of 2021. It is also an 11-year high for international cotton prices.
Behind the crazy cotton prices, its causes are diverse.
In Texas, one of the world's major cotton producing states, extreme drought is under way. Along with international cotton prices, the extent of the extreme drought in Texas is also at an 11-year high, and conditions are likely to get worse.
Texas's cotton crop was largely abandoned because of the lack of rain. Texas, which produces half of America's cotton, is an important crop. According to the US Department of Agriculture forecast, this year, the US cotton abandoned rate more than doubled compared with the same period last year, the production has been significantly reduced.
At the same time, after the epidemic, the consumption power of clothing has recovered, and the supply of raw material cotton is increasing. Expectations that the United States will plant less cotton and more soybeans because of food shortages caused by the Ukraine crisis are also pushing prices higher.
The US is the world's largest exporter, accounting for a third of global cotton exports, and India, the second largest producer and third largest exporter, has also seen a change in the cotton market recently.
Due to the low cotton production in India, the prices of seed cotton and lint have risen all the way to a record high, and the inflation of clothing is serious. To curb the rise in cotton prices, the local textile association advised the government to stop exports. Kotak, India's largest cotton exporter, has also stopped exporting cotton to China.
There are already signs of an increase in overseas procurement to make up for domestic shortages, with the government announcing in April that it would lift import duties on cotton by the end of September.
International cotton prices are expected to remain high in the short term as the US faces a poor harvest and India cuts exports. The World Bank also said in its recent report that it expects cotton prices to rise by nearly 40% in 2022, before falling by 6% in 2023 as weather improves.
Inside and outside cotton price upside down over 1000 yuan
The cotton market of China, the world's largest producer and importer of cotton, is a different story.
The just-concluded 2022 spring cotton planting is in good shape. According to the China Cotton Association, the hydrothermal conditions in most cotton areas are more suitable for cotton sowing and growth. Xinjiang cotton at the end of April most cotton area cotton seedling, seedling earlier than the perennial and last year.
From the price point of view, although there is a strong external drive, but since this year, domestic cotton futures prices remain stable. On May 12, China's cotton price index was 22,313 yuan/ton, an increase of only 1% from the end of 2021, and the internal and external cotton prices inverted more than 1,000 yuan.
"Due to import quota and other restrictions, the international cotton price and domestic cotton price linkage is not particularly close, but due to the low domestic cotton inventory, cotton textile industry export demand benefits from the devaluation of the RMB, it is expected that the future domestic cotton price will not drop significantly. Factors such as poor import and export and logistics have limited supply, demand and production of cotton, but it is expected that the cotton market will further normalize in the future with the gradual optimization of epidemic control, "he said. Bank of China research Institute researcher Wang Meiting told times weekly reporters.
Recent domestic cotton price rise is weak, mainly related to downstream orders.
The Ministry of Agriculture and Rural Affairs released in May China's agricultural supply and demand situation analysis mentioned that downstream textile enterprises lack of orders, raw material demand is weak, cotton sales slow, the market generally hold a wait-and-see attitude to the future market.
"Affected by the epidemic, many garment factories have no orders this year, and many textile factories are half closed." Zhejiang a garment processing employees Liu Meng told times weekly reporters.
According to the survey data of China National Textile And Apparel Association, the textile industry climate index was only 42.6 in the first quarter of 2022, down 14.5 and 19.7 percentage points respectively from the same period of last year and the fourth quarter of 2021.
In addition, capacity utilization in the textile industry was 78.2 percent in the first quarter, 0.1 percentage point lower than a year earlier, according to the National Bureau of Statistics. Media reports, Guangdong Foshan Zhang Cha market average opening probability of only 20%, jiangsu and Zhejiang area grey fabric enterprises operating rate only accounted for 30%. "Gold, silver and four" traditional peak season has basically failed.
In fact, the low utilization rate of textile production capacity is related to the consumer end. In the first quarter, retail sales of clothing, shoes, hats and needles fell 12.7% year on year.
Limited impact on clothing terminal selling price
Although recent domestic cotton price gains have been limited due to the impact of the consumer side, overall, domestic cotton prices are still at a 10-year high.
With the external disk almost synchronous, since April 2020, domestic cotton prices rose all the way.
On April 2, 2020, China's cotton price index stood at 11,105 yuan per ton, doubling in two years. Especially in the second half of last year, cotton prices rose nearly 10 per cent in a month.
"The rise in cotton prices will definitely have a big impact on the garment industry. At the same time, oil prices have risen, leading to high chemical fiber prices." Liu Meng told times weekly reporters. However, whether the rise in raw materials will directly lead to the increase in clothing prices, Liu Meng did not give a definite answer.
"For example, some prices were confirmed with customers half a year ago, and since then prices have risen, it is difficult for us to adjust the prices with customers," she said. "Due to the epidemic and other reasons, the market is not particularly booming at home and abroad, so we cannot afford much on the price."
Then from the consumption terminal point of view, clothing prices will be significantly increased?
Tan Fei, founder of Shenzhen Ousha Shijia Clothing Co., LTD., which mainly operates on e-commerce platforms, told Time Weekly: "The prices of raw materials such as cotton and wool have increased significantly, but our prices will not change. Including t-shirts and other clothes, the cotton fabric will be used more frequently, but the price will not change. The new products will be priced according to the workmanship and the fabric used."
A clothing manufacturer supplying e-commerce platforms also told Times weekly that although cotton prices have risen, there will be no significant increase in clothing prices recently.
"The cost of fabric in the clothing terminal price is not a large proportion. Therefore, in the current situation of low income growth and weak demand, it is difficult to transmit the rise in cotton prices to the clothing industry terminal prices." Wang Meiting said.
Source: Textile fabric platform
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