From November 21st to 25th, ICE cotton futures trading hours were shortened and prices fluctuated and fell. The main March contract barely closed at 80 cents, down 3.60 cents a week, or 2.24%. That week, the World Cup group matches were in full swing, and China’s Yiwu once again became famous overseas. Regardless of whether it set off a wave of sports consumption boom, it was in sharp contrast to the deserted cotton market.
Affected by domestic epidemic control, current cotton consumption expectations are still pessimistic, and the textile industry chain is still working hard to tide over the difficulties. We learned from a series of recent large-scale industry conferences abroad that both the ICA annual meeting and the US Cotton Purchasing Summit have further confirmed that the demand for cotton in factories in various countries is very sluggish, and the actual situation is even worse than expected. At present, the operating rate of most textile factories around the world is 20-50% lower than normal. Some factories expect that the situation may improve after January next year, but I am afraid this is more of a wish than a fact. As terminal consumer demand continues to be sluggish, gauze inventories in many factories are now 2-3 times the normal level, putting tremendous pressure on the entire industry chain. If cotton and gauze inventories are counted together, the floral yarn inventory of the entire industry chain is very large.
Judging from the situation abroad, the result of inflation and economic downturn is that consumers reduce their purchases of cotton products that improve their lives. Consumers are now unable to continue purchasing home textiles and clothing, and instead spend their money on food, housing, and transportation. Domestically, due to the impact of the epidemic, current consumer demand of all types has remained at the lowest possible level. Therefore, currently global consumers do not have a strong intention to consume textiles and clothing. According to estimates by foreign industry organizations, if consumers reduce purchases by 10-15%, factories’ cotton consumption will decrease by 12-18 million bales. There is still a lot of room for downward adjustments in cotton consumption forecasts by major international organizations.
According to statistics from the U.S. Department of Agriculture, as of the week of November 17, the net contract volume of U.S. upland cotton was -26,400 tons, of which China accounted for 94%, another blow to a market with declining confidence. Affected by this, ICE futures closed sharply again that day, and the March contract returned to below 80 cents. Given that China occupies a pivotal position in textile production, the outside world has been paying close attention to China’s economic and social situation and has high expectations for the growth of the Chinese market. Once there are signs and signals of loosening of tightening consumption, the market will surely experience greater market trends. , and judging from the current situation, the cotton market can only continue to dormant.
Currently, the December contract has entered delivery, and ICE’s main contract has been transferred to March. Speculative funds have another three months to go short, and if there are no special circumstances, these shorts will not easily close their positions and withdraw from the market. Therefore, it is difficult for futures prices to rise significantly. On the other hand, as cotton prices fell below 80 cents again, the long and short sides were once again in a relatively balanced state, with no strong intention to withdraw completely, which may make it difficult for cotton prices to rise or fall sharply in the short term.