On May 20, the market expected that China would not stop purchasing US cotton, and ICE futures hit a new high in early trading driven by short covering. In the past three weeks, China has been the core driving force for U.S. cotton exports. Although the two sides have been tit-for-tat on the epidemic and trade issues recently, China has not stopped importing U.S. cotton.
On that day, after ICE futures reached a new high, bulls promptly closed their positions to make profits, and the price quickly fell back to close lower. At this point, cotton prices have been rising for several consecutive weeks, and the previous extremely oversold situation has significantly improved. With the progress of Chinese purchases, the market is expected to continue to develop upwards, but it is necessary to always pay attention to any changes in Sino-US relations. This is the cotton price The “hidden thorn” in the rise.
On Tuesday, U.S. President Trump announced a new and larger agricultural support plan, with total subsidies reaching US$19 billion, including US$16 billion in direct subsidies and US$3 billion in food supply chain subsidies. The maximum subsidy amount for an injured farmer shall not exceed US$250,000.
Foreign analysts believe that whether it is China’s purchase of U.S. cotton in accordance with the trade agreement or central banks’ massive capital injections in financial markets, including the U.S. Department of Agriculture’s substantial increase in global consumption for next year (which is not the actual situation), all are artificial. This significantly supported cotton prices. The bear market depends on demand. If China continues to purchase and various countries gradually relax epidemic control, the outlook for cotton consumption will artificially turn to mild optimism. In this case, cotton prices are more likely to rise slowly. </p
