Apparel / Textiles & Accessories

According to the foreign news on March 7, Brazil's cotton international trade export in February 2023 was 43000 tons, 65.32% lower than that in January, 73% lower than that in February 2022, 69.2% lower than the average level in the same period of the previous five years, a record low. In addition, combined with the US cotton export in 2022/23, not only China's demand is weak, but also cotton consumption is weak in markets outside China, such as Southeast Asia.

1. Brazil's cotton export is lower than expected

According to the February report of CONAB, Brazil's cotton production in 2022/23 is still expected to be 1.978 million tons, up 9.6% year on year, down 4000 tons from the average level of the previous three years. Exports are expected to be high. However, according to the current export data of international trade, exports are high first and then low. From August 2022 to February 2023, the export volume was 1.119 million tons, a decrease of 80000 tons over the same period of the previous year, and a decrease of 600000 tons over the year 2020/21. The sharp drop in monthly exports may be related to Pakistan's foreign exchange reserve crisis, Türkiye's earthquake, and Bangladesh's difficulties in opening letters of credit. To some extent, this also reflects that cotton consumption outside China is declining.

2. US cotton exports are also poor

With the sharp reduction of Brazilian cotton production and the competitive relationship with American cotton, some market participants doubt whether this is due to the lower price of American cotton in the past two months and the higher price of Brazilian cotton? From the recent US cotton weekly export sales, although in the week ending February 16, the export sales were 100000 tons, reaching the annual high of the market, the data next week fell to 38700 tons. According to the data of previous years, US cotton exports should gradually warm up in the middle of January and reach a peak in the middle of February. However, US cotton exports have not improved significantly this year, far lower than the same period in previous years. The import demand of cotton in international trade outside China is significantly depressed, and the economic recession in Europe and the United States has a significant inhibitory effect on global clothing consumption.

3. Brazil's cotton planting is over, and a bumper harvest is likely in 2023/24

According to CONAB data, cotton planting in Brazil was completed on February 25, and cotton planting in Mato Grosso made good progress, reaching 99.6% by February 24. In the February report, the planting area is expected to reach 1.673 million hectares, a record high. Mato Grosso is planted late, and the yield may be affected, but if the weather is normal later, the Brazilian cotton yield is still expected to be good. However, from the current unsatisfactory export data, international trade exports are facing selling pressure. In addition, the local cotton price has fluctuated greatly recently. If the later selling pressure increases and the cotton price falls, the international cotton price may face pressure.

At present, the international trade export orders in China's downstream market are weak, and the export orders in Southeast Asia are also poor. From the international trade export data, global cotton consumption is unfavorable. On the supply side, cotton planting ends in the southern hemisphere, and speculation is only in the planting areas of the northern hemisphere. Market participants expect that the cotton planting area in the United States will decrease by 20%. At the same time, the Federal Reserve is expected to raise interest rates in March. Against the background of weak consumption, the international cotton price will face pressure before the end of March.