In recent days, the main ICE cotton futures contract has once again stood at 80 cents/pound and 81 cents/pound, hitting a high in the past two years. The enthusiasm of cotton companies, traders, and speculative institutions continues to rise. Several An international cotton merchant has judged that the main force of ICE is backed by 80 cents/pound, and the probability of advancing towards 85 cents/pound has increased significantly. For those who did not “get on the train” in time at 75-80 cents/pound, go long. As far as traders and cotton textile companies are concerned, this round of “short-term” rebound has basically been confirmed.
Judging from the quotations of cotton trading companies in Qingdao, Zhangjiagang and other places, although the basis difference of cargo and bonded cotton, including US cotton/Brazilian cotton/Australian cotton/West African cotton/Indian cotton, has not increased as much as ICE Adjusted to a new high in two years, but inquiries and shipments showed signs of peaking and falling. In addition to the quotations (including basis, fixed price) higher than the expectations of yarn mills and middlemen, there was a shortage of 1% tariff quota and the phased slowdown of RMB appreciation. , 2019/20 US cotton, Brazilian cotton, West African cotton and other quality indicators, spinnability and consistency decline, etc., are also important factors restricting US dollar quoted cotton transactions.
The author believes that ICE has once again entered the rising channel and the reasons for breaking through the previous high can be summarized as follows:
First, it is very promising that the U.S. government will launch a large-scale fiscal stimulus plan. Not only the U.S. stock market, bonds, etc. are facing ” “Carnival”, commodity futures are also making up for their gains, and global inflation is accelerating. U.S. President-elect Biden will unveil a new stimulus bill on Thursday, although the actual stimulus plan is expected to be far lower than the trillions of dollars Biden hopes (JPMorgan Chase’s forecast is higher at $900 billion, while Goldman Sachs Group (prediction was US$750 billion), but “one stone stirs up a thousand waves”, investors, institutions, etc. are full of expectations for Biden’s huge stimulus package in the early days of his administration;
Second, USDA’s latest monthly report is a very timely downward adjustment In addition to the production and ending stocks of US cotton in 2020/21, the export volume of US cotton has been increased, which has “fuelled” the rebound of ICE and reached new highs;
The third reason is that in 2020/21, China, Vietnam, Pakistan, The impact of the epidemic in Indonesia, Turkey and other countries has significantly weakened, and cotton consumption demand has retaliated. Therefore, U.S. cotton export contracts have accelerated, leaving competitors such as Indian cotton, Australian cotton, and West African cotton behind. According to statistics, as of the end of December, the cumulative contract volume of US cotton in 2020/21 reached 12.41 million bales, completing 82.7% of the USDA export target. According to the first phase of the China-US trade agreement, China will continue to purchase large quantities of US cotton in 2021;
Fourth, expectations for a decline in global cotton planting area in 2021 have increased, and the supply and demand situation may reverse. In addition to the substantial reduction in cotton planting area in Brazil, which is “certain”, affected by the sharp rise in prices of corn, soybeans and other agricultural products in 2020 (CBOT statistics, corn futures rose by 24.8% in 2020, which is also the largest annual increase in the past 10 years; soybeans throughout the year rose 37.2%, reaching the highest level in six and a half years). The survey results of cotton planting areas in several major cotton regions such as the United States, India, China, Central Asia, and Africa are also very unsatisfactory, forming strong support for the rise of ICE’s far-month contract. </p
