Last week (March 22-26), some commodities, including cotton, fell sharply, and fund bulls continued to close their positions and withdraw at the end of the first quarter. Cotton prices performed well from January to February this year. A correction at this time is normal, but the decline is a bit too large. From February 25 to March 26, ICE futures adjusted to a “full moon”, with three limit drops in a month.
In the past week, the main hot spots in the market have been the slowdown in U.S. cotton sales, tensions between China and Western countries, and rainfall in Texas. The above conditions are all the main reasons for the price drop. However, cotton prices fell below the support of 82.78 cents, triggering a large amount of technical selling and causing cotton prices to fall to the limit on March 25. At present, the economic and market fundamentals have not changed, but cotton is now struggling to return to 80 cents. Is the bull market for cotton over?
ICE futures December contract has fallen 9 cents since peaking near 88 cents more than a month ago. However, after falling nearly 400 points on March 25, it rebounded by 219 points the next day, which may be a good sign. After this sharp decline, there should be a large number of transactions in U.S. cotton and non-U.S. cotton, and the remaining inventory of U.S. cotton will bottom out faster. With prices falling sharply last week, cotton demand will increase significantly, and cotton consumption is expected to exceed production in 2021/22. This is a very important supporting factor for fundamentals. It should be said that the current price can slowly increase the proportion of cotton consumption, so it is more beneficial to the long-term price trend. Foreign analysts believe that after this correction, the cotton bull market will return, and the cotton supply and demand side will also be beneficial to the price trend.
The focus this week is the USDA’s release of intended cotton acreage on March 31. This survey was conducted when December futures prices were still 80 to 85 cents. . The USDA projected 12 million acres at its Outlook Forum in February, and industry forecasts were for 11.5 million to 12.5 million acres. </p
