On March 12, ICE cotton futures gave up half of the previous day’s gains during the session. Although the USDA forecast reduced U.S. ending stocks this year, the magnitude of the reduction was lower than market expectations. At the same time, U.S. cotton export data is also unsatisfactory. The market believes that as U.S. cotton inventories decline and the global economy recovers, U.S. cotton demand should be particularly bright. However, market concerns that U.S. dollar interest rates will rise soon are changing the global economic situation.
As of March 4, the cumulative volume of U.S. cotton contracts this year reached 13.79 million bales, lower than the 14.043 million bales a year ago, but the second highest since 2010/11, and the average for the same period in the past five years. to 11.543 million bales. At present, U.S. cotton signings have completed 96% of the USDA forecast, and the average for the same period in the past five years was 87%.
As we enter the middle of the month, the market begins to turn its attention to the USDA’s intended planting area at the end of the month. The report will be released at noon on March 31, US time. Currently, the official forecast of the USDA is 12 million acres, a slight decrease year-on-year, but the market generally believes that considering the performance of competing crops, this year’s cotton area should be significantly lower than in previous years.
On March 12, after a sharp intraday decline, ICE cotton futures finally recovered some of their losses. In the past week, cotton futures have gone up and down, first falling nearly 5 cents, and then rising sharply. After this shock, the market expects that the number of fund long positions may continue to decline.
Currently, market concerns about rising U.S. dollar interest rates are beginning to rise. Inexplicably, huge government stimulus packages that are thought to be inflationary are actually spurring higher short-term U.S. dollar interest rates. Currently, the U.S. dollar index is at a low in the past three years, and the upward trend since the end of February is obvious.
Overall, fund bulls are not very enthusiastic about the cotton market. Weather and planting will become increasingly important in the next few weeks, especially after the USDA intention area report is released. The southern tip of Texas in the United States is still quite dry after last week’s rainfall, and there will be no significant rainfall before the end of this month. Under the influence of La Niña climate, this trend will continue.
Technically, the resistance level above ICE’s main force is 88.56 cents. Only after it breaks through can it continue to rise. Only if it exceeds 92.80 cents can it reach a new high. If it falls below 85 cents, the price adjustment time will be extended. long. </p
