As Zheng cotton futures continued to make upward breakthroughs, ICE cotton futures jumped short and opened higher on July 6. The main December contract quickly kept up with the pace and easily exceeded 88 cents/pound during the session, approaching the 90 cent mark. .
While the strong rise in Zheng cotton is driving the external market, the US hurricane is about to threaten the southeast and cotton fields this week, and there is room for short-term speculation in the market. In addition, spot transactions increased significantly after ICE fell sharply last week, and it is expected that US cotton export data this week will be relatively eye-catching. Overall, the market rebounded quickly after the recent decline in the external market, and low factory raw material inventories will support the market at the end of the year.
However, as China’s reserve cotton rotation begins, the pace of quota issuance and cotton imports may slow down, and there is also uncertainty in the US cotton production forecast. After the price surge There is still a risk of a pullback. Although there has been too much rainfall in the United States recently, it still does more good than harm to new cotton. The US cotton seedling situation reports in recent weeks have shown this. According to the current actual sown area in the United States, if the U.S. cotton abandonment rate drops significantly, the USDA supply and demand forecast in July will likely increase U.S. cotton production instead of reducing U.S. cotton production as the market expects. This is also in line with the USDA This is a consistent practice, especially when U.S. cotton signings are not strong (current signings for next year are far behind the same period in previous years).
According to the analysis of foreign institutions, the lowest cotton abandonment rates in Texas in the past ten years were 6.25% and 7.964% in 2015 and 2016 respectively. If this year’s abandonment rate With a rate of 10-15%, the harvested area in Texas will soar from 3.2 million acres last year to 5.73 million acres-6 million acres, and the yield range will be 578-809 pounds/acre, with the average of the past ten years being 666.6 pounds/acre. acres, the average over the past five years is 709 pounds per acre. If the average of the past five years is used, Texas cotton production will likely reach 8.46-8.907 million bales, lower than the highest value in the past decade of 9.3 million bales in 2017.
Currently, the U.S. industry’s expectations for an increase in Texas cotton production are not low, and the total U.S. cotton output this year may exceed predictions. In June, the USDA estimated that the harvested area this year was 9.63 million acres. However, if the Texas abandonment rate drops significantly, the US cotton harvested area this year may be close to 10.5471 million acres. Based on an average yield of 847 pounds per acre, U.S. cotton production will reach 18.611 million bales. If the yield is increased to 875 pounds per acre, the total output will reach 19.226 million bales. It can be seen that the abandonment rate in Texas this year is very critical. If the US cotton seedling situation continues to recover in the next few weeks, the proportion of poor seedlings in Texas will stabilize at a very low level, and the abandonment rate may also decline further.
The expected increase in US cotton production has actually been reflected in export quotations. At present, the quotation basis of new cotton shipped in the first quarter of 2022 in the United States has begun to weaken. The highest staple length of the E/MOT 41-4 series has reached 37-39. The loading period is from January to July 2022, and the basis of the staple length is 39. The difference is 1,200 points (March/May contract), which is very attractive to spinning mills.
From a technical perspective, the rapid rebound in cotton prices after last week’s sharp decline is in line with the characteristics of a bull market. The 100-day moving average of 84 cents is an important support, but 88-89 cents A breakthrough is also needed as soon as possible to maintain the long-term upward trend, otherwise the market will enter a correction. </p