On January 4, 2021, ICE futures rose more than 100 points intraday, with the increase reaching 2% at one time, and the main 3 contract approached the 80 cent mark. On the same day, the drop in the U.S. dollar index and the collective rise in the commodity market created a good atmosphere for cotton prices. Gold rose by $50 intraday, crude oil rose, and the grain market soared collectively. The New Year seemed to bring new optimism to the financial market, with many markets experiencing A positive trend.
In 2020, ICE cotton futures recorded the largest annual increase since 2010, with recent month contracts rising by 13%. Factors such as the rise in the U.S. stock market, the fall in the U.S. dollar index, the beginning of COVID-19 vaccinations, and poor weather during the harvest have pushed cotton prices up.
As of December 24, 2020, the total volume of U.S. cotton contracts in 2020/21 has reached 11.385 million bales, which is higher than the 11.228 million bales in the same period last year. It is the highest value in the same period since 2010/11. The average value for the same period in the past five years was 9.065 million packages. As of December 24, 2020, the cumulative contract volume of U.S. cotton reached 78% of the USDA forecast, while the average for the same period in the past five years was 68%. The market expects that the January USDA supply and demand forecast will continue to reduce U.S. ending stocks, and the report will be released on January 12.
On January 4, ICE futures got off to a good start, with the main March contract hitting a new high. However, the plunge in the Dow Jones Index still shocked some markets, and prices in many markets fell from their intraday highs. On that day, the Dow Jones Industrial Average rose by 200 points, and then fell by 700 points. The turmoil caused by the epidemic and the election caused the grain market to collectively fall from its intraday high. Energy and cotton all gave up their gains, but cotton performed very strongly.
Traders’ focus on Tuesday will be the U.S. Senate runoff elections in Georgia. A prominent Wall Street firm has suggested to its clients that if the Democrats win, meaning the United States will be governed by one party, the Dow Jones could see a 10% downside correction, or a 3,000-point drop. If this event occurs, it will be difficult for many markets not to sell off.
In 2021, ICE cotton futures need to see that U.S. cotton exports continue to grow rapidly. In the last four weeks of 2020, U.S. cotton contracts exceeded 1.4 million bales, which will reduce U.S. cotton ending stocks, but U.S. cotton stocks are still at historically high levels. In December last year, the USDA lowered the ending stocks of US cotton from 7.25 million bales to 5.7 million bales, but it was still the second highest since 2008/09. Of course, over time, USDA will gradually reduce U.S. ending stocks. </p