In recent days, the main contract of ICE cotton futures has continued to consolidate and accumulate strength within the 73-75 cents/pound box. The trend of rising bottoms remains unchanged, breaking through 75 cents/pound and 78 cents/pound in the short term. The target has not been adjusted.
Some foreign businessmen and speculators believe that no matter from the perspective of U.S. cotton supply and demand fundamentals, technology or external market news, ICE is in a state of “easy to rise but difficult to fall”. Spinners with solid orders , traders need to seize the opportunity to buy at bargain prices below 75 cents/pound.
Cotton traders in Zhengzhou, Qingdao and other places in Henan reported that as ICE and Zheng cotton have risen in turn, in the past week or so, they have made orders before the Spring Festival, the RMB has appreciated sharply, and “buy up but not down”. Under the influence of emotions, inquiries for cargo, bonded, and customs-cleared cotton not only did not fall with the increase in quotations, but were much more active than in November, taking advantage of the main force of ICE to build positions in the 73-75 cents/pound range.
As for the reasons why ICE is bullish, the author simply summarizes the following points:
First, the “countdown” to Biden entering the White House, Sino-US relations are expected to recover. On December 14, local time, in the U.S. Electoral College vote, Democratic presidential candidate Biden received the votes needed to be elected president of the United States;
Second, the United States, the United Kingdom and other countries started vaccination against the new coronavirus, and the global The recovery of the economy, trade, and transportation will accelerate in 2021. The United States launched the first batch of COVID-19 vaccinations outside of clinical trials on Monday, kicking off a large-scale immunization campaign;
Third, some cotton-related companies and speculative institutions believe that there is still a certain degree of false high “moisture” , especially in 2020/21, the quality and grade indicators of US cotton have dropped significantly;
Fourthly, the rise in crude oil, iron ore and other energy and chemical industries has promoted the rebound of ICE. OPEC and its production-cutting allies reached a compromise agreement to gradually increase production, increasing crude oil production by 500,000 barrels per day starting in January and continuing the compensation mechanism. The increase in production was significantly lower than expected, and futures such as WTI and Valente rose in response;
Fifth, it is possible that both the Federal Reserve and the U.S. government will introduce fiscal stimulus benefits. The Federal Reserve will announce its last interest rate decision of 2020 on Thursday. According to industry analysis, there is a certain probability that the Federal Reserve will conduct “distortion operations” to lower long-term yields and maintain a loose monetary environment; with Biden elected as president, fiscal stimulus will accelerate;
Sixth: It is difficult to cool down the enthusiasm of China, Pakistan, Vietnam, Turkey, Indonesia and other countries for signing contracts and purchasing US cotton in 2020/21 and 2021/22. In addition to the first-phase trade agreement between China and the United States and the decline in cotton production and quality in Pakistan, the expected sharp decline in cotton planting area in Brazil, West Africa, Central Asia and other countries in 2020/2021 is also an important support. </p