February 4th coincides with China’s traditional “Little New Year”. In the past, the market before the holiday usually ended in a lackluster manner, but this year’s domestic and foreign market performance is more outstanding than the last. Yesterday, Zheng cotton futures just closed out of Changyang. In the evening, ICE cotton futures simply pushed to the daily limit. The main contract hit the highest point in two and a half years, completely ignoring the strengthening of the US dollar index.
The U.S. cotton export weekly report of the day showed that the volume of U.S. cotton contracts last week was still close to 300,000 bales, an increase of 5% from the average of the previous four weeks, and the shipment volume increased month-on-month. China continues to make large purchases, and the U.S. cotton export destination can be said to be “Full blooming”, China, Turkey, Pakistan, Vietnam, Indonesia all have large orders. According to the analysis of foreign industry organizations, there is currently continuous demand for cotton consumption and imports in various countries around the world. The market is full of expectations for next Tuesday’s USDA supply and demand forecast. Traders generally believe that US cotton exports will increase again and ending stocks will continue to decline.
On the same day, the cotton market responded to the supply and demand forecast released by ICAC two days ago. According to ICAC’s latest forecast, global cotton production this year has dropped by 9% year-on-year, and many of the reductions in production come from large cotton-consuming countries. These countries rely on their own cotton production to meet consumption. Production reductions will lead to a significant increase in cotton import demand in these countries. Based on this, ICAC estimates that global cotton imports will increase to 9.3 million tons. Since the beginning of this year, exports from the United States (August-November) and Brazil (August-December) have increased by 45% and 17% respectively compared with the same period last year. If next week’s USDA forecast is partially positive, the cotton market will undoubtedly have more reason to continue rising.
In addition, the recent advancement of the U.S. economic stimulus package has also added optimism to the market. The market expects that the Democratic Party in the U.S. Congress will pass a $1.9 trillion new crown relief package without Republican support. The U.S.’s resumption of ultra-large-scale money printing will put pressure on the U.S. dollar again, which will continue to be positive for commodity futures. </p
