At the New York Cotton Roundtable Forum in mid-August, U.S. industry experts analyzed and discussed the USDA supply and demand forecast for August. They agreed that the report was very negative and that cotton prices may rise to 64 cents in the short term, and it is possible that It has surged to 65-66 cents, but it needs weather events to cooperate, but in the long term, cotton prices will fall back to around 55 cents or even lower.
Experts generally believe that China has purchased enough. The worry now is that cotton prices may rise to 65 cents again only if China buys in large quantities. From the current point of view, the fluctuation range of ICE futures is 57.50-65 cents. The price has tried to break through 65 cents many times, but failed every time, indicating that the resistance at this price is very high. If it fails again, the cotton price may quickly fall to 61 cents even tested the support of 57.50 cents. If the fund does not see the possibility of breaking through 65 cents, it will quickly exit the market.
Several experts said that the US Department of Agriculture’s August supply and demand forecast once again shows that global cotton supply is abundant but consumption is weak. As global ending stocks rise, global cotton supply has fully met demand before the new cotton harvest in 2020/21. The negative supply and demand forecasts are mainly reflected in the sharp increase in ending stocks in the United States and the world, as well as the significant increase in ending stocks in countries that compete with U.S. cotton for the export market. The U.S. cotton production has been increased from 17.5 million bales to 18.1 million bales, but there has been no significant reduction in production due to hurricanes and droughts as expected by the market. This shows that the quality of U.S. cotton seeds continues to improve, so the U.S. cotton yield has reached a record of 938 pounds/ acre. These new varieties provided a huge jump in yields, allowing U.S. cotton to remain competitive.
Despite this, industry insiders still believe that the US Department of Agriculture’s August forecast data is too biased, and it is possible to lower US cotton production and increase consumption in the September forecast. Although the market hopes that cotton prices will continue to rise, considering that cotton demand is seriously insufficient and supply is too abundant, cotton prices may still fluctuate between 61 and 65 cents before the USDA forecast is released in September. , after which the price increase will end. From a historical perspective, cotton prices also usually reach their highest point of the year around August.
The author believes that for cotton, there is not much support from its own fundamentals. Even if there is a problem with cotton supply, price increases will be difficult to maintain. The real solution to the cotton problem is consumption, and the epidemic has brought cotton consumption to a halt in Asia. The only good news may come from the external market and macro environment. The U.S.’s outrageous economic stimulus will continue to artificially push up stock markets and commodity prices. The macro perspective and the food crisis caused by the epidemic may be able to save cotton prices that are difficult to extricate themselves from the epidemic. </p
