In the first week of 2023 (January 2-6), ICE cotton futures continued to fluctuate under the influence of the external market. The market briefly fell to 80 cents and then quickly rebounded driven by technical buying and bargain hunting. Cotton basically There is still no direct good news. As of last Friday, the main March contract closed at 85.68 cents, up 2.31 cents from the previous week. Overall, cotton prices continue to fluctuate strongly above 80 cents.
At the beginning of the new year, the macro environment for cotton continues to improve. On January 6, data released by the U.S. Department of Labor showed that U.S. non-farm employment increased by 223,000 jobs in December, higher than market expectations of 200,000, but wage growth was only 0.3%, lower than the expected 0.4%. At the same time, the U.S. manufacturing data PMI fell to 49.6 from 56.5 in November, which was the first time it fell below 50 since May 2020, indicating that the service industry, which accounts for more than two-thirds of U.S. economic activity, has shrunk. In addition, U.S. factory orders fell by 1.8% in November, while they increased by 0.4% in October. Market expectations were for a 0.8% decline. Federal Reserve officials said the U.S. jobs data was another sign of a gradual slowdown in the economy, and if that continues, the Fed could lower interest rates to a negative 25 basis points at its next policy meeting. The above situation has significantly increased the possibility of the Federal Reserve raising interest rates by 25 basis points, and prompted U.S. stock markets and commodities to rise together. ICE cotton futures ended sharply higher despite the negative impact of the weekly export report.
In addition to the continued improvement of the macro situation, the market has high expectations for the recovery of demand after the Spring Festival in China. According to the analysis of foreign institutions, although the current spot market is still stagnant, as the inventory of the textile industry chain is digested, terminal consumption and raw material replenishment are expected to gradually recover to some extent in the next few months. Taking the United States as an example, the clothing retail situation in the first half of the year-end holiday is very good, and clothing imports to the United States have recently begun to decline. If these two aspects continue, the problem of overstocked clothing inventories in the United States is expected to gradually ease, thus affecting the upstream industry in the future. have a positive impact on chain demand.
Since New Year’s Day, the temperature in many areas of the United States and China has been unseasonably high. The warm spring-like weather seems to indicate that the new year is coming. The recent performance of domestic and foreign stock markets and commodities seems to be warming up. Cotton is eager to try, led by improved macroeconomic and consumption expectations. In the short term, although China’s demand is expected to increase after the Spring Festival, the Spring Festival holiday is approaching, and it is difficult for cotton consumption to recover substantially in the short term. The recovery of U.S. cotton exports will be difficult, and the process of cotton price recovery will also be bumpy. This Thursday (January 12) is a day for centralized data release. The U.S. Department of Agriculture will release its January global supply and demand forecast and U.S. cotton export weekly report, while U.S. December CPI data will also be released at the same time.