During the Spring Festival, the new coronavirus in China attracted the attention of the global market, and foreign analysts expressed their views on its impact on the cotton market and the Chinese economy.
Dr. Cleveland, a well-known American cotton expert, believes that this unexpected event has seriously affected the global cotton market. Global cotton consumption is likely to fall by at least 500,000 bales or more from pre-virus estimates, which would increase global ending stocks and potentially reduce U.S. cotton exports. U.S. ending stocks may surge to 5.9-6 million bales, an increase of 1 million bales year-on-year. Affected by the epidemic, China extended the Spring Festival holiday, economic growth is expected to slow down, and most commodities have been affected.
Before the virus incident, China had just started purchasing US cotton. In the week ending January 23, China signed contracts for 127,500 bales of U.S. cotton. Without the impact of the epidemic, ICE futures would have risen by more than 100 points that day. The virus incident has undoubtedly disrupted U.S. cotton export plans. The short-term trend of ICE futures has undoubtedly been impacted, but there is considerable support at 67.00-68.50 cents, and the long-term trend has not changed for the time being. If China can control the epidemic and take actions to stabilize the economy and demand can recover, cotton prices may still return to above 70 cents. Cotton’s fundamentals can provide support for prices.
The American Plains Cotton Cooperative believes that the biggest question in the market is how fast the coronavirus will spread and how much economic damage it will cause to the Chinese economy. China’s restrictions on the movement of large parts of its population are likely to have a considerable impact on the Chinese economy. Whether China returns to the market soon remains to be seen, and it may not be obvious for several weeks. Affected by the long holiday in China, most traders expect U.S. cotton export sales to decrease next week.
Australia’s authoritative analysis agency believes that it is difficult to accurately estimate the potential impact of the new coronavirus at this stage. Technically, the main ICE futures contract should have good support at 67 cents. If it falls below 66.6-65 cents, it means that the market is facing bigger problems. Once this pullback is complete, which may last several weeks, the market is expected to return to the mid-70s. The market needs to pay attention to the negative impact of the virus incident on the positive factors of the first phase of the Sino-US trade agreement.
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