In the week of January 10-14, the international cotton market was still booming. The main March contract of ICE cotton futures reached a new level, reaching a new high of 119.70 cents. The new round of rise started in late December reached another level. Stage high point.
That week, the news from fundamentals was quite impressive, starting with the USDA supply and demand forecast. According to the report, U.S. and global ending inventories were reduced again, leading to another tightening of U.S. and global fundamentals. This is the biggest benefit of this month’s report. Although the U.S. cotton export forecast was lowered by 500,000 bales, the U.S. Department of Agriculture used a large paragraph to explain that the United States has full confidence in shipments for export, and the best is yet to come. Then there is the US Cotton Export Weekly Report. Since the New Year, market rumors have been confirmed that traders have signed a large number of sales contracts. In the week ending January 6, the total contract volume of US cotton reached 100,000 tons. Although the shipment volume is still low, it is much higher than the previous level. At the same time, the U.S. dollar index fell sharply one after another, which also contributed to the bullish sentiment in the cotton market. After a few days of slight calm, the release of two bullish reports stimulated cotton prices to rise sharply again.
No matter what USDA says, the market will eventually be led by him. In fact, if you think about it simply, when ICE futures were still over 70 cents a year ago, U.S. cotton contract signings remained at 50,000 to 60,000 tons. Now that the cotton price has increased by 30 cents, the contract volume has still not dropped. The United States has enough confidence, not to mention that the global epidemic shows no signs of easing. Once the epidemic passes, retaliatory consumption will come sooner or later. Even if it doesn’t happen in China, it will definitely happen in European and American countries.
Since the outbreak of the epidemic, the cotton market in the past two years seems to have completely changed, no longer following the previous laws of gap size and inventory-to-consumption ratio. According to USDA forecasts, China’s cotton imports this year have dropped from 2.8 million tons to 2.12 million tons. This must have been absolutely negative in the past, but now the market turns a blind eye. The reason is that the market firmly believes that China’s demand will be very good, not only for cotton demand, but also for cotton demand. There is also a need for outer yarn.
China’s textile consumption focuses on exports. Although the domestic yarn sales market has a large base, due to the different consumption concepts of Chinese people, they have always refused high prices. Price increases are unlikely to significantly boost domestic consumption, while foreign countries follow the concept of pure Cotton is environmentally friendly and green, and anything that meets these characteristics will have a market. Some insiders predict that after the Xinjiang cotton ban is implemented, China’s demand for foreign cotton and foreign yarn will increase. However, the domestic sales of cotton and cotton yarn will hardly bring surprises, mainly due to the promotion of the population base. What must be mentioned here is that according to the “14th Five-Year Plan for National Planting Industry Development Plan” issued by the Ministry of Agriculture and Rural Affairs, the risk of ensuring supply of cotton and other agricultural products through imports is increasing. How to promote domestic cotton consumption is a question worth thinking about. .
Returning to external futures, when ICE rose recently, the December 2022 contract had already left the “comfort zone” of 90 cents. Although it was still far behind the main contract, the highest intraday price had reached 97 cents. , the questions before the New Year about how to integrate the near-term and far-month contracts now seem to be beginning to have some answers.
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