On March 30, ICE cotton futures tried to repair the previous excessive decline and rose slightly before the USDA intention area was released. The survey shows that the industry expects the intended area of US cotton to be 11.4-13 million acres, with an average of 12.147 million acres, close to the 12 million acres of the USDA Agricultural Outlook Forum.
On that day, the U.S. dollar index continued to rise, and U.S. bond yields continued to rise. In January, the U.S. dollar index hit a new low, with the 10-year Treasury yield only 0.25% and now reaching 1.753%. As the Biden administration continues to roll out infrastructure stimulus packages, U.S. dollar interest rates will continue to rise.
At the same time, the market is looking forward to this week’s US cotton export weekly report. Although the number of contracts signed last week decreased, there is no problem in achieving this year’s goal. The current sales progress has reached 101%. The market has every reason to expect that USDA will increase its supply and demand forecast in April to increase U.S. cotton exports this year.
In the past month, the fund’s net long positions have dropped from the highest level of nearly 80,000 to 58,000, of which the May contract and the July contract decreased by 51,000, but Contracts for next year will increase by 61,500 lots. In other words, the fund is withdrawing from this year’s contract and planning for the next year.
Currently, an important negative factor in the cotton futures market is the rise in the U.S. dollar index. At present, there is no change in cotton fundamentals, while the main May contract and December contract have fallen by 10 cents and 15 cents respectively. The sharp rise in the US dollar index is the main reason. This is particularly important because the current economic environment supports the strengthening of the US dollar. For every one percentage point rise in the US dollar index, cotton futures will fall by 5 percentage points. Since the end of February, the US dollar index has risen by more than 3%, and the corresponding ICE futures have also fallen by nearly 15%.
Currently, the cotton market is in urgent need of good news, and it is brand-new good news. This week’s USDA intention area is estimated to be 12-12.5 million acres. Exceeding this range will give 12 Monthly contracts have a greater impact. In the past nine years, the intended area in March has been 1.1 million acres higher than the area planted at the end of June three times, and the market should be prepared for this. Cotton prices still have a long way to go, and many things will happen in the future. The fundamentals are still very strong, and the market needs to be more patient. </p