Since mid-January, ICE cotton futures have entered a downward trend due to the outbreak of the COVID-19 epidemic, the plummeting global stock and bond markets, triggering continuous plunges in commodity futures, and the strengthening of the U.S. dollar. The main May contract has fallen from 73.08 cents/ The pound fell to 50.68 cents/pound (the intraday low was the lowest since May 2009). In just over two months, ICE plummeted to 22.4 cents/pound, a drop of 30.65%.
Some institutions and cotton-related companies have judged that once the epidemic gets out of control globally, trade, exchanges, transportation, etc. are likely to be greatly impacted or even interrupted; in addition, the sharp decline in cotton consumption is almost “certain” , so ICE has the short-term motivation to break through the 50 cents/pound or even 47 cents/pound round mark.
Judging from the feedback from some international cotton merchants and export companies, although the main contract exceeded 55 cents/pound and 52 cents/pound, a large number of ON-CALL price contract transactions were completed (in 2019/20 Not only does U.S. cotton continue to be overbought, but buyers such as Vietnam, Turkey, and China are very strong in signing contracts), but on the one hand, because ICE futures have fallen too fast and too much, many contracts signed before January 2020 are difficult to execute or are directly canceled ( There are even cases where the buyer does not take delivery of the goods or negotiate for settlement when the cotton arrives in Hong Kong). Although some buyers hope that traders will delay shipment and delivery, the probability of default increases significantly. A cotton company in Qingdao said that because some foreign and cotton import companies generally only charge 5%-10% of the contract deposit for old customers and large customers (15%-20% for new customers and small buyers), once During the contract period, ICE futures and cotton spot prices plummeted by more than 20% or even 15%. The buyer’s enthusiasm for fulfilling the contract dropped significantly, and the number of delayed shipments, requests to re-sign the contract, or breach of contract increased accordingly;
On the other hand, ICE The main contracts have broken through 60 cents/pound and 55 cents/pound, approaching 50 cents/pound. Judging from the external market and technical aspects, cotton prices have no bottom. Global textile mills and traders no longer take the initiative to take orders, and try their best to Reduce the risk of raw material crashes. Judging from the survey, some buyers believe that under extremely negative circumstances, ICE’s main contract may test the second low in more than 17 years at 41.71 cents/pound (the lowest point is 40.25 cents/pound), so they are in a “kill the fall and chase the rise” mood. Thicker. </p
