In the second week of October, ICE cotton futures first rose and then fell. The main December contract finally closed at 83.15 cents, down 1.08 cents from a week ago, and reached an intraday low of 82 cents. Entering October, the decline in cotton prices has slowed down significantly. The market has repeatedly tested the previous low of 82.54 cents and has not yet effectively fallen below this support level.
Foreign investment circles believe that although the U.S. CPI in September was higher than expected, indicating that the Federal Reserve will continue to vigorously raise interest rates in November, the U.S. stock market has experienced one of the largest single-day reversals in history, which may mean that the market is paying attention to deflation. As for the inflation part, as the stock market reverses, the commodity market will gradually be supported. From an investment perspective, the prices of almost all commodities are currently at a low point. Domestic investors believe that although the U.S. economic recession is expected to remain unabated and there will be more interest rate hikes in the future, the U.S. dollar’s bull market has gone through nearly two years and its core benefits have been basically digested. The market needs to beware of the negative effects of interest rate hikes. Cash out anytime. The trigger for this fall in cotton prices is the economic recession and reduced demand caused by the Federal Reserve’s interest rate hikes. Once the U.S. dollar shows signs of peaking, risk assets will gradually stabilize.
At the same time, last week’s USDA supply and demand forecast was also bearish, but cotton prices still found support at 82 cents, and the short-term trend tended to consolidate sideways. At present, although cotton consumption continues to decline and supply and demand this year tend to be loose, foreign industries generally believe that considering the large reduction in U.S. cotton production this year, the current price is close to the production cost. Cotton prices have fallen by 5.5% in the past year. , corn and soybeans rose by 27.8% and 14.6% respectively, so it is not appropriate to be too bearish on cotton prices in the future. According to U.S. industry sources, due to the huge price gap between cotton and competing crops, some cotton farmers in major producing areas are already considering switching to cereal crops next year.
As futures prices fell below 85 cents, some textile mills whose stocks of high-priced raw materials were gradually depleted began to increase purchases appropriately, although the overall quantity was still very limited. Judging from the CFTC report, the number of On-Call contract prices increased significantly last week, and the number of December contract prices increased by more than 3,000 lots, indicating that textile mills already believe that ICE is close to 80 cents, which is close to their psychological expectations. As spot trading volume increases, it will inevitably form support for prices.
Based on the above analysis, now is an important observation period for changes in market trends. The short-term market may enter consolidation, even if there is not much room for decline. From the middle to the end of the year, cotton prices may be supported by external markets and macro factors. As prices fall and raw material inventories are consumed, factory price points and regular replenishment will gradually return, providing the market with a certain upward momentum at a certain period of time. .