According to CFTC statistics, the number of ICE cotton futures ON-CALL contracts on February 12, February 19, and February 26 were 73,780, 69,389, and 61,328 contracts respectively. As ICE’s main contract plunged from a high of 95.60 cents/pound to below 90 cents/pound, buyers’ enthusiasm for purchasing at low prices was stimulated, and the ON-CALL contract transactions accelerated.
An international cotton merchant reported that in the past two days, ICE’s main May contract has continuously broken through downwards. Buyers from China, Pakistan, Vietnam, Indonesia and other countries have become more enthusiastic about picking up goods at prices, and a large number of ON-CALL contracts have been executed. , the proportion of expected contract defaults has dropped significantly.
The author believes that for cotton textile companies and traders, when the opportunity comes to purchase US cotton, Brazilian cotton, Indian cotton, Australian cotton, and West African cotton at low prices, they should enter the market in batches and one after another. Once ICE pulls back to In the range of 80-85 cents/pound, buyers have no reason to hesitate and should boldly purchase orders. Judging from the following points, there is a high probability that ICE futures will rebound again and reach 90 cents/pound to 95 cents/pound. Textile companies and middlemen must not be “short” again.
First, the US$1.9 trillion stimulus plan struggled to pass procedural votes in the US Senate, and discussions began on the 628-page relief bill. Although the scale of the stimulus is likely to be reduced to US$1.4 trillion, the boosting effect on the US stock market and commodity futures market cannot be underestimated;
Second, crude oil, other energy sources, and black commodities will make up for the gains. Saudi Arabia is considering extending voluntary production cuts until April, and the attack on the U.S. Assad Air Force Base in Iraq has caused tensions in the Middle East, all of which have stimulated a sharp rise in crude oil prices (the main domestic crude oil futures contract rose 5.03% in early trading on March 5, and fuel The main futures contract rose by more than 4%);
Third, the fundamentals of U.S. cotton continue to release positive news. According to statistics from all parties, as of February 25, the cumulative contracted export volume of U.S. upland cotton in 2020/21 has reached 3.1433 million tons, accounting for 93.13% of USDA’s forecast total annual exports, while the year-on-year export progress in the past five years is only 80% about. Considering that according to the first phase of the China-U.S. trade agreement, China will still sign a large number of contracts to purchase U.S. cotton in 2021, as well as the strong recovery in cotton consumption demand in Southeast Asian countries such as Vietnam, Pakistan, and Indonesia, U.S. cotton will still be “oversold” in 2020/21. ;
Fourth, the Federal Reserve will continue to maintain a loose monetary policy (not to raise interest rates, not to reduce QE), global inflation may be inevitable, and commodities need new valuations. Federal Reserve Chairman Powell promised in his speech on Thursday that even if the economy improves and inflation rises, the Federal Reserve will continue to maintain loose monetary policy and did not mention reversal operations. </p
