Since late April, ICE cotton futures have oscillated upward driven by the apparent slowdown in the growth of the COVID-19 epidemic, the sharp rebound in U.S. stocks, and the strengthening of technical aspects. The July contract has tested upward on the back of 50 cents/pound, and has stood above 55 US dollars. Cent/pound, 57 cents/pound and other important points, the optimism of cotton trading companies and speculators continues to ferment; coupled with the short-term covering of short positions, there is a possibility that ICE will test or even stabilize at 60 cents/pound in the short term.
According to CFTC statistics, in the past two weeks in April, ICE cotton futures 2019/20 ON -CALL point price contracts continued to be traded as the market rose, with a cumulative decrease of 1,017 contracts from April 10 to April 24 (a decrease of 3.98%); while the ICE cotton futures fund’s net long rate also dropped from -9.84% to -14.78% .
Why is it judged that the main ICE contract is expected to exceed 60 cents/pound? The author’s views are as follows:
First, in May, European and American countries will press the “reset button” on economy, trade, transportation, etc., and gradually resume production and life. Although there is a second wave of epidemics, The risk of an outbreak, but it is a “stimulant” for global finance, stock markets, and commodity futures spot markets;
Second, crude oil is in a continuous upward channel, which has a negative impact on the bottoming out of the entire commodity futures market. The rebound added fuel to the fire. With OPEC+ starting to cut production on May 1, crude oil consumption in various countries around the world slowly returning to normal, and the United States’ “artistic” handling of the increase in commercial crude oil inventories, etc., the positive stimulation of crude oil is that it is easy to rise but difficult to fall in the short term;
Third, China’s contracted import of U.S. agricultural products in 2019/20 may accelerate (including cotton). From a time point of view, as the COVID-19 epidemic had a great impact on consumption and transportation from February to April, contracted imports of U.S. cotton also slowed down significantly. In order to ensure the “implementation” of the first phase of the Sino-U.S. trade agreement, from May to July, the U.S. Cotton procurement may usher in retaliatory growth;
Fourthly, due to the third wave of the new crown epidemic may break out in India, Pakistan, Brazil and African countries, the cotton planting area and growth in 2020 will be affected. Field management, yield quality, etc. may have a certain impact. In particular, India is likely to become the next “epicenter” of the epidemic due to its backward and seriously inadequate medical infrastructure and lack of testing reagents and other supplies;
Fifth, the Fed’s interest rate cuts and the U.S. government’s massive fiscal stimulus policies will still take turns to push up the financial, stock and bond markets. It is reported that the U.S. Congress and the White House are rethinking the fourth phase of fiscal stimulus, which may exceed US$1 trillion. </p