According to CFTC statistics, as of now, there are 82,620 2020/21 ON-CAll contracts on the ICE cotton futures market, a significant decrease of 5,150 contracts from December 25, 2020. This is mainly due to the fact that ICE’s main contract has repeatedly fallen back to $80 since January. The cent/pound mark stimulated buyers to take orders at lower prices, but as the main contract once again stood at 80 cents/pound and 81 cents/pound (the high of 82.08 cents/pound on January 14), it continued to hit new highs in the past two years. , the difficulty of ON-CALL point price transactions has increased significantly.
Cotton-related companies in Jiangsu, Henan and other places expressed regret that they did not price and purchase within the ICE main contract range of 72-77 cents/pound, and lost the opportunity to lock in raw material costs and improve the competitiveness of gauze. Opportunities; the enthusiasm for pricing above 81 cents/pound is relatively low. For purchase contracts before the end of January, there are only two ways to solve them: one is to admit losses and bargain at a lower price according to the contract before the end of the month; the other is to negotiate with export companies, International cotton merchants negotiated to postpone the price point in an effort to minimize risks.
Judging from the external factors, ICE market sentiment and U.S. cotton fundamentals in January and February, the ON-CALL contract may become a “hot potato”, leaving buyers with room to price and unwind. The probability is low. The reasons include the following:
First, when Biden takes office in the White House, he will launch a multi-trillion-dollar economic stimulus plan on January 20, although the actual size ultimately approved by Congress may be lower than the Democratic proposal; in addition The Federal Reserve’s “unlimited” monetary easing, the U.S. dollar index fell, and U.S. stocks and commodity futures are expected to make up for their gains;
Second, USDA’s latest monthly report, the strong performance of U.S. cotton contracted exports in 2020/21, etc. The benefits have not yet been effectively released (due to the epidemic and Trump’s impeachment and litigation, the US political situation has experienced brief turmoil);
Third, the first phase of the Sino-US trade agreement is still an important factor in Sino-US relations. As a ballast, Chinese companies have recently started the pace of US cotton purchases in 2021. ICE is prone to rise but hard to fall under the medium and long-term benefits of Chinese purchases throughout the year;
Fourthly, although the current ICE long-term ratio has increased from 30 to 30 % fell back to 29.78%, but is still at a relatively high level; coupled with the strong performance of corn, soybeans, soybean meal and other agricultural products, ICE cotton futures remain attractive to funds, institutions, etc.;
Fifth, global cotton demand and textile and clothing consumption are expected to recover faster in 2021, and spot support for ICE is relatively strong. Judging from the survey, since the third and fourth quarters of 2020, not only China, Vietnam, Bangladesh and other countries have taken the lead in emerging from the epidemic swamp, but India, Pakistan, Indonesia and other major textile countries have also fully resumed work and production. Textile and clothing consumption and cotton demand have shown a retaliatory trend. rebound. </p
