According to CFTC statistics, as of April 14, 2023, the 2022/23 ON-CAll contracts on the ICE cotton futures market fell to 33,614 contracts, a significant decrease of 2,086 contracts from the previous week (as of April 6). In just one week, the decline was Reaching 5.84%; while the fund long rate has risen for two consecutive weeks, ICE’s main July contract continues to consolidate in the 80-85 cents/pound range.
A large cotton trading company said that due to the sharp plunge of ICE contracts on April 20, with the main contract once approaching the limit, a certain amount of ON-CALL price contracts were quickly traded, and buyers from China, Vietnam, Pakistan and other countries The enthusiasm of companies to enter the market for hedging near 80 cents/pound still needs to be restored. Therefore, there are great differences among cotton-related enterprises, institutions and investors as to whether bulls and funds can hold the 80 cents/pound mark in the short term.
According to industry analysis, the current focus of attention is: First, spring sowing in western Texas in the United States has been completely hindered by high temperature, drought, and wind and sand. However, continuous rain in the central and south cotton areas and southeastern cotton areas has made it difficult for spring sowing. Therefore, the sowing progress of U.S. cotton in 2023 has been greatly accelerated compared with the same period last year. The slowdown may provide support to the ICE market; secondly, can the May FOMC meeting be the last time the Federal Reserve raises interest rates, and can the tightening cycle end? Third, India is about to usher in the 2023 cotton sowing season. Weather factors and expected earnings have a prominent impact, which will play a greater role in the balance of global cotton supply and demand in 2023/24. Fourth, amid the protracted conflict between Russia and Ukraine, the Black Sea grain export agreement may face variables. . Recently, the Russian Foreign Minister stated that if no progress can be made in removing obstacles to Russian fertilizer and grain exports, we will have to consider whether this agreement is still necessary. The impact of international grain price fluctuations on the cotton market cannot be underestimated.
The USDA report shows that from April 7 to 13, 2023, the contracted volume of U.S. upland cotton exports in 2022/23 was 14,097 tons, a decrease of 57% from the previous week and a decrease of 41% from the average level of the previous four weeks. According to industry analysis, the decline in U.S. cotton contracting volume is due to the fact that ICE cotton futures continued to consolidate at 82-83 cents/pound that week (the market has no direction), the quantity of U.S. cotton in 2022/23 for post-inspection is small, the quality indicators have declined, and “big customers” “Chinese buyers have reduced or even suspended sales due to low export order prosperity in the second quarter of 2023, etc. It is worth noting that from April 7 to 13, many countries including China, Pakistan, Vietnam, South Korea, etc. have canceled the 2022/23 U.S. cotton contract, indicating the quality, shipment, order-taking situation of U.S. cotton, and foreign exchange such as Pakistan/Bangladesh. The impact of reserve crises and other issues is likely to expand.
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