In the past half month or so, ICE cotton futures have once again gone through a “roller coaster” market (the main contract fell from 65.05 cents/pound to 62.11 cents/pound, and then rebounded to approach the strong resistance level of 65 cents/pound). The sentiment of bulls and funds chasing bulls has not been affected by the negative monthly report of USDA and the secondary rebound of COVID-19 in Europe, Asia, and the Americas (according to CFTC statistics, as of late August, the long ratio of ICE cotton futures has rebounded to +19.94 %). The trend that the bottom center of gravity of ICE’s main contract has stabilized at 62 cents/pound is becoming increasingly obvious.
The author judges that it is a high probability event that ICE will open 65 cents/pound again in the short term and raise the competition range between bulls and shorts to 65-70 cents/pound. Textile companies and traders are on ICE Opportunities to place orders and purchase when the main contract is below 65 cents/pound are continuing to decrease. Therefore, every pullback and accumulation of energy by ICE is an opportunity for purchasing companies to enter the market to “buy at low prices” and place “tailor-made” orders.
First, the fundamental support of US cotton. First, the drought and flood disasters in the United States continue to ferment, so the USDA is expected to take the initiative to correct the U.S. cotton production in 2020/21; second, China and the United States have agreed to hold a phone call in the near future to evaluate the progress of the first phase of the trade agreement, and Chinese companies are still The 2020/21 US cotton will be purchased according to the agreement; thirdly, the resumption of work and production of the cotton textile industry in Pakistan, Vietnam, India, Turkey, China and other countries is accelerating (some Southeast Asian yarn mills are close to full capacity production), and the epidemic has a negative impact on the entire industry. The impact of the chain has weakened, and consumer demand for US cotton, Australian cotton and other products has also rebounded;
Second, global inflation expectations are heating up. In response to the impact of the COVID-19 epidemic on the economy, trade, employment, etc., in the first half of 2020, countries around the world unanimously launched a model of monetary easing and helicopter money, especially the Federal Reserve’s major interest rate cuts + unlimited fiscal stimulus policies. Recently, the U.S. stock market has soared again, with both the S&P 500 Index and the Nasdaq Index hitting record highs; some institutions and investment banks believe that although the negotiations between the U.S. White House and congressional Democrats on a new round of epidemic aid plan have reached an impasse, the plan may be reached. It is inevitable to boost the U.S. economy through a compromise plan. Therefore, the short-term bear market formed by various special reasons in the United States has passed and is ushering in a new round of bull market;
The third is the supplementary increase in global food The pressure is high. According to estimates, global grain production will decrease by approximately 20% in 2020 due to epidemics, floods, locust plagues, etc. Several major grain exporting countries have either restricted grain exports or directly raised grain prices. The United Nations has also issued a food warning, stating that the world is facing the largest food crisis in the past 50 years. Therefore, it is natural for the prices of corn, rice, wheat and other crops to rise. Regardless of the price ratio of grain and cotton or market sentiment, ICE is in a difficult position. falling state. According to surveys, global corn, sorghum and other crop prices have risen sharply since June, and rice, wheat and other prices are also about to move (the domestic market has already started first). </p
