Since late June, the main contract of ICE cotton futures has continued to consolidate within a narrow box of 59-60 cents/pound, with the daily rise and fall shrinking significantly, and there are prominent signs of “tops at the top and bottoms at the bottom” in the short term.
Some institutions and cotton-related companies have analyzed that the main factors that have suppressed ICE’s main force breaking and standing at 60 cents/pound are as follows: First, the new crown epidemic in the United States continues to rage, and 31 states Reported on the resurgence of the epidemic. According to statistics, as of June 26, local time, at least 11 states in the United States have suspended or postponed their restart plans, which has an increasing impact on the economy, trade, transportation, employment, etc.; second, the United States and Europe are starting a “trade war” , the mutual imposition of tariffs has caused “turbulence in the financial, stock market, and commodity futures markets.” On June 24, it was reported that the U.S. government was considering imposing tariffs on $3.1 billion of goods imported from the United Kingdom, Spain, Germany, and France, paving the way for a new round of trade confrontation with Europe; the European Union subsequently launched a strong counterattack, demanding The WTO approved the imposition of additional tariffs on US$11.2 billion worth of US goods; third, the main US cotton-producing area, Texas, received rainfall, and the drought was alleviated to a certain extent; coupled with the arrival of India’s southwest monsoon as scheduled, cotton planting is now at a climax (already broadcast) The area has increased significantly year-on-year), which has exerted a strong suppression on the rebound of ICE and MCX futures; fourth, in addition to Chinese buyers who are still actively pursuing the first phase of the Sino-US trade agreement, buyers from Vietnam, Indonesia, Turkey and other countries have obviously “stepped on the brakes and cannot awesome”.
Why does ICE still have a chance to test 60 cents/pound, but bulls and funds are not willing to take profits, close their positions and flee? According to CFTC statistics, as of June 23, ICE’s long rate has rebounded from +0.62% in mid-June to 1.98%, with 72,633 ON-CAll contracts in 2020/21. The reasons analyzed by the industry mainly include the following three points:
First, the Federal Reserve has implemented a “two-pronged approach” of monetary stimulus and unlimited fiscal stimulus from the US government at an unprecedented speed and scale, which has had a negative impact on the income of small and medium-sized enterprises, residents and departments in the United States. The financial, stock and bond markets are still prosperous and have certain stamina; secondly, not only China, but also India, Pakistan, Indonesia, Turkey and other major cotton demand countries have forcibly started the cotton textile industry, and the production and sales of gauze, clothing, etc. It is gradually recovering and picking up; thirdly, U.S. crude oil futures are “easy to rise but difficult to fall” and interact with the ICE market. Oil and gas shares have risen 50% since hitting rock bottom in March. As oil prices rebound, OPEC+ will face challenges in further extending production cuts. At the Federal Reserve’s resolution in June, the inflation rate expected by the Federal Reserve was far lower than market expectations; while the PCE price index in May was in line with expectations and the CPI decline in May narrowed significantly to -0.2 percentage points, both of which helped crude oil futures enter the rebound channel again . </p
