Since late July, ICE cotton futures have gone through a “roller coaster” market. The bottom fell below 60 cents/pound (59.51 cents/pound), and the high points at both ends opened the 63 cents/pound round mark, trying to Hitting the strong resistance level of 65 cents/pound, the market is greatly affected by factors such as the U.S. stock market, monetary policy, China’s contracted imports, and weather in the main U.S. cotton-producing areas, but the fundamentals of supply and demand appear “insignificant.”
From a short-term perspective, the market is trading sideways at the 62 cents/pound mark again. The long and short sides are in a stalemate, and it is difficult to break through 60-65 cents/pound. On the one hand, Texas, the main cotton-producing area of the United States, was hit by floods after high temperatures and droughts, global cotton consumption demand struggled to recover, and the first phase of the Sino-U.S. trade agreement was still being implemented despite encountering various external obstacles (China will still sign a contract to import U.S. cotton), The U.S. government’s “addiction” to unlimited fiscal stimulus and other benefits have established the bottom of ICE; on the other hand, the cotton planting area and output in the northern hemisphere are expected to increase (India’s performance is particularly outstanding); the second outbreak of the new crown epidemic has a negative impact on trade, transportation, retail, cotton consumption, etc. Worries about the impact of the epidemic and the uncertainty about the direction of Sino-US relations (the closer to the US presidential election in November, the greater the risk of comprehensive “decoupling” between China and the United States) have caused ICE to test 65 cents per pound and 68 cents per pound. Insufficient confidence in points/pounds. Before Sino-U.S. relations see the light of day and the COVID-19 epidemic is not effectively controlled and disappears, long funds and bulls can be said to be “fearful of wolves before and tigers behind.” ICE can only oscillate repeatedly in the box, looking for opportunities to make breakthroughs.
An international cotton merchant said that from July 24 to July 29, the main ICE contract opened again at 60 cents/pound, so not only some ON-CALL point price contracts were traded; but also China, Vietnam, Pakistan, etc. Domestic buyers are also actively inquiring and signing contracts; coupled with traders lowering the basis for large customers and large orders, it is expected that the weekly US cotton export report in late July should be relatively good, forming support for the ICE market. The cotton merchant judged that because the 2019/20 US cotton has been completely “oversold”, some exporters and trading companies are worried about how to deliver goods (whether to use 2018/19 old cotton, Brazilian cotton, Australian cotton or cotton from other origins instead of delivery) goods), coupled with concerns that Sino-US relations will continue to deteriorate before the November presidential election, buyers and sellers may continue to negotiate to move the contract to the next year. </p