On March 30, the ICE futures May contract fell below the 50-cent mark again in early trading. The stringent measures taken by various countries to combat the epidemic have had a serious impact on the global economy. On that day, the US government’s US$6 trillion economic stimulus package did not bring a greater boost to the market. Although the US Dow Jones index rose, it was slightly calm.
Last weekend, U.S. President Trump extended the social distance policy until the end of April, and India began a nationwide lockdown for three weeks on March 25. These have begun to have a knock-on impact on the Indian textile industry. At the same time, U.S. consumers have basically stopped shopping, which has made textile factories in various countries even worse. The market is worried that U.S. cotton orders will be cancelled. In fact, many textile mills have requested to suspend or postpone shipments.
According to reports, from Vietnam to India to Central American countries, many small and medium-sized textile factories have closed down. Textile mills reject sales from cotton merchants, cotton merchants reject ginners, and ginners reject cotton farmers. The decline in cotton consumption is being transmitted from bottom to top throughout the entire textile industry chain, and the domino backlash effect creates an embarrassing burden on the market. Under this situation, it is natural for ICE futures to fall to more than 40 cents, but this was simply unimaginable two months ago.
March 31 is both the end of the month and the end of the quarter. Investors may close their positions to make profits. After all, cotton prices have already been excessively oversold. At noon on Tuesday (March 31), U.S. time, the U.S. Department of Agriculture will release its forecast for U.S. cotton planting intentions in 2020. Although from a historical perspective, the annual intended area is always inaccurate, this year the factors of the epidemic have been superimposed, making the data released under this situation even more unreliable. Currently, the market generally expects the US cotton area to be 12.7 million acres, down from 13.7 million acres last year. In any case, in recent days, the trend of ICE futures in recent and far months has begun to diverge. With the introduction of the ultra-large-scale economic stimulus plan in the United States, the performance of the December contract and other far months has been relatively strong. At the same time, after entering April, all aspects of the U.S. economy and life will face unprecedented difficulties, and front-month contracts will continue to be under tremendous pressure. </p
