Global cotton futures soared amid tightening supply.
ICE July cotton has been on a surge. On May 15, the US market rose by more than 4%, and the cumulative increase in three days exceeded 10%. It is currently at a high of 85.57 cents/pound.
According to analysis, there are two main reasons for the rise in U.S. cotton: fund owners have been bullish for a long time, and the USDA report in May once again confirmed the destocking trend in the global cotton market.
On May 10, the U.S. Department of Agriculture released its monthly global cotton supply and demand forecast, releasing cotton data for the 2017/18 season for the first time. As consumption exceeded production for three consecutive years, global cotton stocks decreased by 518,000 tons in 2017/18.
At the same time, the report lowered the production of 2016/17, and the export volume was raised to 3.157 million tons, reflecting the recent export sales data that exceeded expectations, and the ending inventory was also lowered accordingly.
Hedging Research Investment quoted COFCO Futures Fu Bin as saying that the new annual supply and demand report confirms that the global cotton market continues to destock, and the overall pattern of rising cotton prices has not changed. It also confirms the fact that old crop inventories in the United States are tight, igniting the market. Explosive point.
On the other hand, funds’ net long positions increased. As of May 9, 2017, the net long positions of U.S. cotton futures and options funds were 111,529 contracts, equivalent to about 2.45 million tons of cotton, which is at a historical high; the fund’s net long positions accounted for 37.5%.
Fu Bin said that international funds’ demand for cotton allocation has been unprecedentedly high, and they have almost bet on the largest positions in history. Obviously funds are the main bulls in the ICE cotton market.
U.S. cotton may see 93 cents in July?
Fu Bin said that before May 11, 2017, the market had been in a state of “boiling frogs in warm water”. As cotton prices fluctuate and rise, market sentiment is gradually warming up. Finally, the new year’s supply and demand report confirmed both the tightness of old production and the continuation of the destocking trend, igniting the explosive point, and the volatile rise evolved into a short-squeeze surge.
He pointed out that the number of unpriced sales contracts is equivalent to 2.4 million tons of cotton, and the fund’s net surplus is equivalent to 2.45 million tons of cotton. In contrast, the old crop is particularly nervous. This ignited the market’s explosive point, and the volatile and rising soft squeeze market evolved into a short squeeze-style surge.
At present, there are only two months left before July delivery. Fu Bin believes that there is not much time left for unpriced orders. If the market is allowed to develop freely, US cotton may see 93 cents/month in July. pound.
</p
