Since late March, U.S. stocks have begun to rebound. So far, the Dow Jones Industrial Index has rebounded by as much as 40%. Although, funds, and bulls are speculating that the southeastern cotton region may be hit by tropical storm “Bertha” and the main cotton-producing area of Texas is experiencing drought, it is “certain” that India’s cotton planting area will decline in 2020, and it will face a new round of desert locust plagues. A serious threat, but ICE cotton futures still failed to break through the 60 cents/pound mark under the support of many positive factors. The confidence and bullish chasing sentiment of some cotton trading companies and speculators were somewhat shaken.
From a technical perspective, the price of ICE’s main contract has continued to oscillate upward since April, which can be said to be “stable and rising.” In addition, the epidemic situation in Europe and the United States has been intermittently easing, and the benefits caused by the restart of the economy, trade, transportation, production, etc. are gradually emerging (some foreign trade and textile and apparel companies in coastal areas reported that orders from Europe, the United States, Japan and South Korea have recovered significantly compared with March and April); in addition The weather in major cotton-producing areas around the world is hyped, and the food crisis from Africa to Southeast Asia continues to expand due to insect plagues, droughts, etc. Therefore, the industry believes that it is only a matter of time before the main ICE contract opens to the 60 cents/pound mark, but the short-term 55-60 cents/pound box It is still the key to the fierce battle between long and short.
Why is ICE’s recent trial of 60 cents/pound “successful and unsuccessful”? The author believes that there are several main reasons:
First, the future of Sino-US relations is unclear. From the COVID-19 epidemic to trade agreements to Hong Kong issues, American politicians have imposed threats from all aspects. Therefore, the prospects for Sino-US relations are uncertain and changing, causing ICE and other commodity futures prices to follow the trend and have an unclear direction;
The second is Affected by the epidemic, not only the global trade and retail industry have declined sharply, but also layoffs and unemployment have increased sharply. In 2020, the balance of global cotton supply and consumption will be seriously tilted. The USDA monthly report on cotton consumption in China, Southeast Asia and other countries this year is obviously exaggerated and untrue, and there is a high probability of further substantial adjustments in the future;
The third is the low-price dumping of Indian cotton in 2019/20 and various The depreciation of major currencies against the US dollar is also a factor that prevents ICE from breaking through 60 cents/pound. At present, the spot quotation of Indian cotton is 2.5-3 cents/pound lower than the same quality US cotton with June/July shipping date, and 3-4 cents/pound lower than Brazilian cotton; while the exchange rates of Indian rupee and Brazilian real continue to rise sharply. Depreciation, cotton export competitiveness improved. </p
