On October 20, ICE cotton futures reached a new high in the market driven by speculative bulls. The CFTC position report last weekend showed that the fund’s net long position had reached 59,000 lots, but the sudden sharp rise in cotton prices showed that the fund had been brewing a long breakthrough for quite some time.
From past experience, traders who follow the trend will maintain their positions and eventually close them. However, so far, the 73 cents hit when China and the United States signed the agreement in January this year is the next target price for bulls.
At the same time, another factor supporting the market is that the United States Department of Agriculture has overestimated U.S. cotton production, and cotton farmers everywhere generally report that several hurricanes have caused greater than expected losses. Some analysts have publicly stated that the true output of US cotton is close to 16 million bales, and the specific situation will depend on how next month’s report is adjusted.
In addition to weather and production factors, another major event that the market is paying attention to is whether a new fiscal stimulus bill can be passed before the US election. The two parties in the United States are currently playing a “cat and mouse” game on this issue, going back and forth and leaving the market confused.
On October 20, although ICE futures surged to a new high and then suddenly plunged 90 points, it did not cause real damage to the technical graphics. In fact, such an intraday breakthrough is usually a good thing for the market, which is conducive to accumulating strength to challenge new highs in the future.
The National Hurricane Center forecasts two possible tropical storms. Tropical Storm Epsilon is brewing in the mid-Atlantic before swirling in the southern Caribbean. Epsilon appears to be heading toward Bermuda, while another tropical cyclone appears to be heading toward Mexico’s Yucatan Peninsula. So far, neither storm has threatened the continental United States, but with Mother Nature, it’s absolutely impossible to know.
Weather forecasts show that rainfall in Texas, the Delta and the Southeast in the United States will be higher than normal in the next 1-5 days. In fact, the rains were most concentrated in southern Alabama and Georgia, and if the rains come as expected, the new cotton harvest will be delayed until next week. Moreover, rainfall in US cotton-producing areas will also be higher than normal in the next 6-10 days.
Currently, the market is waiting for this Thursday’s weekly US cotton export report. Although the number of U.S. cotton contracts decreased last week, Pakistan and Bangladesh became the main buyers of U.S. cotton. Perhaps the COVID-19 epidemic in these two countries has basically passed, and the situation in other Asian countries has also improved significantly. As Asian countries gradually resume production and normal order, demand for cotton will also expand. </p
