This week, the main contract of ICE once again exceeded 70 cents/pound, stimulated by the surge in U.S. and European stock markets, crude oil and other commodity futures, and the landfall of Tropical Storm Eta in Florida. Bulls are trying to back up 70 cents/pound. The trend and target of hitting 73 cents/lb and 75 cents/lb remain unchanged.
However, according to CFTC statistics, since early November, while the number of ON-CALL price contracts on ICE has dropped from 91,500 to 87,400, the net long rate has also dropped from +26.35% to +8.19%. , the signs of long funds closing, retreating, and moving positions are more prominent.
Industry analysis shows that there are three main reasons for the short-term ICE “suspension”: First, there is still uncertainty in the U.S. government, and it is difficult to estimate the later domestic and foreign policies; second, based on cotton fundamentals, USDA will While U.S. cotton production was slightly increased to 17.1 million bales, global ending stocks increased by 300,000 bales; however, the U.S. cotton inventory-to-consumption ratio reached 42%, the highest since 2007/08. Although U.S. cotton exports have experienced the first phase of China-U.S. Trade deals provide a “boost” but are not without pressure.
Several international cotton merchants and importing companies said that the current bottom of ICE cotton futures has moved up to around 70 cents/pound, and the short-term stalemate between the long and short sides is at 70-73 cents/pound. The competition is still fierce, but the trend of breaking through 75 cents/pound in the middle line remains unchanged. Cotton textile and traders who are not “on the train” below the main contract of 69 cents/pound or even 70 cents/pound may be “missing”. risk.
Firstly, no matter who the new president of the United States is, the US government’s fiscal stimulus policy of 1.88 trillion or even more than 2 trillion is on the way; secondly, not only the main cotton-producing areas of the United States continue to be hit by storms and rainfall , cotton production and quality are expected to decline significantly, and India’s CAI recently stated that the recent continuous heavy rains and insect pest problems have led to a decline in cotton yields. Cotton production in 2020/21 is expected to decrease by 1.1% year-on-year (to 35.6 million bales), compared with the previous 3800-4000 The forecast for 10,000 bales has plummeted; thirdly, due to the epidemic, weather, export restrictions and other factors, global food prices have risen for five consecutive months, forming strong support for the prices of cotton and other agricultural products.
On November 5, according to data released by the Food and Agriculture Organization of the United Nations, the FAO food price index in October was 100.9 points, a month-on-month increase of 3.1% and a year-on-year increase of 6%; among which wheat prices strengthened, and grain prices The index increased by 7.2% month-on-month to 111.6 points in October, and the year-on-year growth rate was as high as 16.5%; while corn, rice and other food crops are in high sentiment to make up for their gains. </p