In late August, the main ICE futures contract fluctuated slightly after breaking through 66 cents/pound. The long and short sides started a fierce battle around 65 cents/pound. The bottom of the December contract stood firmly at the 65 cents/pound mark. It still needs to build momentum and consolidate many times, and the operating range of cotton prices will gradually increase to 65-70 cents/pound.
Some institutions, international cotton merchants, and investors are worried that as the U.S. State Department declares that it will restrict the activities of Chinese diplomats stationed in the United States, insists on arms sales to Taiwan, and military aircraft appear over Taiwan, Trump Senior officials of the Prussian government continue to release signals that poison Sino-US relations and continue to make malicious remarks against China, etc., which will lead to greater uncertainty in Sino-US relations; while in some major cotton-producing areas of the United States, although two hurricanes passed through, they only affected The impact on cotton production and quality was significantly lower than expected (only the southern border of Texas encountered super strong winds and heavy rains). Therefore, neither fundamentals nor external news can give ICE direction guidance in the short term. Speculators Profit-taking is on the rise.
The author believes that the ICE market will continue to strengthen in September/October, and there is a high probability that the main force will test 68 cents/pound and 70 cents/pound. The cotton market in 2020/21 will be “strong externally and weak internally” The pattern is difficult to change. Why continue to be bullish on ICE and foreign cotton spot prices? The author’s views are summarized as follows:
First, no matter how the United States provokes, curbs China’s development, and hypes up China’s threats, for both China and the United States, the first phase of trade coordination has become the “ballast” of economic and trade. , before the US presidential election, it is unlikely that Trump will “swallow himself from the palace”. China will continue to sign a large number of contracts to import US cotton from August to December 2020;
Second, domestic employment and economic data in the United States The continued improvement has provided support to the financial, stock market, and commodity futures markets. Economic data released by the United States showed that durable goods orders increased by 11.2% month-on-month in July, up from 7.60% last month, and were expected to grow by only 4.3%; while the number of ADP jobs in the United States increased by 428,000 in August, a record high The third largest increase, the previous value was an increase of 167,000, indicating that although the epidemic has not yet been effectively controlled, the expansion trend of the U.S. manufacturing and service industries is obvious;
Third, China will issue 400,000 in 2020 The sliding ton quasi-tariff cotton import quota is good for ICE and international cotton spot. Several foreign businessmen said that due to the strong basis difference and high quotation of U.S. cotton in 2020/21, even if Chinese processing companies do not purchase large quantities of U.S. cotton, they will sign contracts to import Brazilian cotton, Australian cotton, West African cotton, etc., which will also reduce the global cotton supply and the end of the period. Inventories stimulate the rise of ICE;
Fourthly, as of now, the operating rate and load of the cotton textile industry in Vietnam, Turkey, Indonesia, Pakistan, Bangladesh and other countries have basically returned to pre-epidemic levels, which is good for 2020/21 Annual inquiries and purchases of U.S. cotton continue to heat up. Since India’s MSP has been raised by 5% this year, and the quality, consistency, and spinnability of Indian cotton are still far behind those of West African cotton, Brazilian cotton, and American cotton, and the Australian cotton production has seriously “shrunk” in 2020, the global Textile companies’ raw material procurement focus is on U.S. cotton and Brazilian cotton;
Fifth, there are not many negative factors in fundamental negative factors such as U.S. cotton growth and output. On the one hand, the progress of cotton bolls and catkins in the United States is obviously lagging behind that of 2018 and 2019. In particular, only 44% of those with good or above growth conditions were 4 percentage points lower than the same period in 2019 (the poor seedling rate in Texas was 42%); on the other hand, the Texas and southeastern cotton areas were hit by successive tropical storms, and the cotton field losses were still high. in the statistics; but new disasters are already on the way. </p
