On March 16, ICE cotton futures plunged again in early trading under the pressure of the new coronavirus epidemic. Due to the out-of-control global epidemic, countries around the world have closed places for social activities. Business and the economy have suffered a huge impact, and market confidence has almost collapsed. There are numerous reports of citizens rushing to buy supermarket goods, bars and restaurants closing, and various sports events being canceled. The U.S. Centers for Disease Control and Prevention has warned U.S. residents to stay home and cancel gatherings of more than 50 people for at least the next two months.
U.S. President Trump tried to calm market sentiment at a press conference on Sunday, convincing the country that things were getting better, but also confirmed that things could be worse. Trump administration officials have developed a nationwide testing plan that will not put a strain on hospitals and clinics. At the same time, the Federal Reserve unexpectedly lowered the federal funds rate to a target range of 0-0.25% and announced a $700 billion support policy, which is actually a kind of quantitative easing.
All ICE futures contracts are below 60 cents, including the December 2020 contract. Since the beginning of this year, the front-month contract of ICE futures has fallen by nearly 11 cents, or 15%. The USDA’s intended cotton acreage forecast will be released at the end of the month. Due to the rapid spread of the new coronavirus epidemic, the market is skeptical about the effectiveness of whatever area is predicted. Although the current price of cotton is lower than the cost of planting and financing is difficult, American cotton farmers still have to continue planting and hope for good results.
On March 16, the Dow Jones Index in the United States opened more than ten minutes late. The reason turned out to be that the price had already shut down during the call auction stage. The continued collapse of the stock market has put tremendous pressure on cotton prices, causing all ICE futures contracts to fall below 60 cents. Just 6 weeks ago, they were all above 70 cents. The originally bullish fundamentals for the cotton market have turned neutral as the Dow Jones Industrial Average fell too far. This week’s US cotton export weekly report is definitely another high number. No one can tell how much higher it will be than the previous week. At present, the cotton market has been completely controlled by the global economic recession and macroeconomics. The CFTC position report released last Friday showed that funds sold 12,600 contracts and their positions have turned from long to short. </p
