Although the net contract volume of U.S. upland cotton reached a new high this year from January 31 to February 6, 2020, the U.S. manufacturing PMI, ADP employment, and non-agricultural employment data in January performed exceptionally. , US cotton planting area is expected to decline by 10%-12%, but it seems difficult for the main ICE cotton futures contract to rebound in the short term and stand at 70 cents/pound and 72 cents/pound. Long funds and cotton companies have repeatedly tried to pull High, all ended in failure.
Some cotton-related companies believe that there are three main factors that suppress ICE: First, China’s new coronavirus epidemic has not yet reached an inflection point, and there is still uncertainty about whether it can effectively curb the spread, prevention, control, and treatment; Second, according to the signing of the first phase of the China-U.S. trade agreement, although the number of U.S. cotton signed by Chinese companies has increased significantly, it is far from being equal to the cancellation of the contract; third, the latest USDA report has increased global cotton inventories, a significant decline in consumption, and pressure to move upstream. transfer.
Why did Chinese buyers continuously cancel purchase contracts in the two weeks from January 24 to February 6 (32,000 tons were canceled from January 31 to February 6, and the net contract volume was -11,000 tons) ?
Some international cotton merchants and importing companies summarized it as follows: First, the “black swan” of the new crown epidemic has not only increased concerns among U.S. processing plants and exporters, but also Chinese purchasing companies have postponed shipments and deliveries. The buyer and seller negotiated to postpone the execution of the contract; secondly, this year’s main ICE contract rebounded from the lowest point of 57.65 cents/pound to 71.96 cents/pound (March). Some exporters with low credibility and weak contract awareness Merchants are trying to reduce losses by postponing delivery and requiring new freight contracts; thirdly, due to the December/January shipping date, the grade and quality of U.S. cotton in 2019/20 is generally not high (mainly EMOT/ME, color grade 41- 3. 41-4, 51-4 and SLM; strong 27-28GPT cotton accounts for a large proportion), which does not match the actual needs of China’s large and medium-sized textile enterprises, so the shipping schedule is adjusted to February/March; fourth, as of At present, the Chinese government has not announced a reduction or reduction in the high import tariffs on U.S. cotton, and the situation is still unclear. In addition, under sliding quasi-tariffs, the price and quality of U.S. cotton in 2019/20 need to be more competitive than Xinjiang cotton.
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