Recently, the COVID-19 epidemic has shown a serious rebound momentum in many countries around the world (the United States, Brazil, India, etc. are still at the “epicenter” of the first wave of the epidemic), and many countries have tightened restrictions again. Countries such as India, South Africa, Spain, and Italy The renewed blockade will have a secondary impact on the economy, trade, transportation, exchanges, retail, etc. that have just recovered. ICE futures are long and funds are increasingly worried. In addition, ICE’s main contract has exceeded 60 cents/pound and 63 cents/lb. cents/pound, buyers including China, Vietnam, Indonesia and other buyers have sharply dropped their purchasing power and purchase volume for U.S. cotton in 2019/20 and 2020/21; while export companies and international cotton merchants to the U.S. have “major launches” In the 2020/21 U.S. cotton season, there are obvious signs of “braking” when signing contracts with Chinese buyers. Therefore, despite the continued high temperature warning in West Texas, USDA congratulates the forecast that it is neutral to bullish and other positive supports, ICE’s main contract is still moving forward. After a correction, market sentiment has turned somewhat.
An international cotton trader said that since July, ICE has continued to rise mainly due to the dry and hot weather in Texas, the rotation of cotton reserves from China, and the U.S. stock market despite the raging COVID-19 (the Nasdaq index has repeatedly reached new highs). Driven by the continued rebound in crude oil futures prices and other favorable factors, they broke through 60 cents/pound and 62 cents/pound in a row, and were once close to the resistance level of 65 cents/pound during the session. Although the rise is relatively fast, it is due to external markets and policies. Stimulation, lack of effective support from the cotton consumption level, ICE’s performance is somewhat “violent”, so the adjustment is not unexpected; the main contract in July has a high probability of falling below 62 cents/pound and 60 cents/pound.
So what are the short-term factors that influence the direction of ICE? The author summarizes it as follows:
First, because the 2019/20 US cotton has been obviously “oversold”, can the main Chinese buyers ICE continue to sign contracts for the 2020/21 US cotton at more than 60 cents/pound? It deserves great attention; second, the second wave of the global COVID-19 epidemic has rebounded in an all-round way, which can be described as “pressing the gourd and raising the gourd again” for global cotton consumption, textile and clothing production and export, retail industry, etc., and has a serious impact on trade, exchanges, and markets. It is difficult to predict how big it will be; third, under the epidemic, not only has cotton consumption demand in China, India, Pakistan, Turkey and other countries dropped sharply, but more and more cotton mills in Vietnam, Japan, South Korea, Indonesia and South American countries have canceled US cotton contracts; fourth, from the weather According to the forecast, there will be little rainfall in the next 10 to 15 days in West Texas, and the weather will still be dominated by high temperature and drought. Although the impact of irrigation, insect pests and other problems on the growth of cotton in Texas cannot be underestimated; however, the rejection rate will increase and the good and good rate will drop significantly. The good news has been basically digested, and the market sentiment is obviously bearish. </p
