Last week (June 6-10), after continuous declines, the point trading of textile mills provided support for the market and triggered a small-scale squeeze. The weekly US cotton export data showed positive performance. There were no new changes in USDA supply and demand forecasts. ICE cotton futures The July contract rebounded significantly after hitting a bottom of 136 cents, with the settlement price rising to 145 cents. The December contract rebounded to 122 cents due to weather factors, with the two rising by 6.88 cents and 4.46 cents respectively.
Recently, a very entangled issue in the cotton market is that there are problems with both cotton production and consumption. Which party will have a greater impact or play a leading role. In terms of production, although Texas in the United States has received several rains, according to the latest forecast, it has returned to high temperature and drought conditions last weekend. By the end of this week, the dry and hot weather will reach a new height. It’s quite stressful. Except for the United States, the monsoon rains in India have started weakly and somewhat late. The forecast says that the monsoon rains will return to normal in mid-June. Sowing in northern India (accounting for 15% of the country) has begun. Due to insufficient irrigation, the current progress is year-on-year. 5 percentage points behind. In the southern hemisphere, Australia has suffered the worst rainfall in decades in recent months. The quality and yield of the new cotton to be harvested have been damaged, and on-time shipment may be a problem. However, the situation in dryland fields is better than expected, and the total output may still be 5.4 million bales. about. Brazil’s official expected output is 2.8 million tons, but the industry generally believes that it is only about 2.6 million tons because the yield per unit area did not meet expectations.
From the perspective of consumption, according to the June forecast of the United States Department of Agriculture, global consumption in 2021/22 will be reduced by 1.3 million packages month-on-month, and the forecast for next year will be reduced by 450,000 packages. Last Friday, the U.S. CPI reached 8.6% in May, triggering the U.S. stock market to plummet 800 points and the U.S. dollar index to soar again. Market concerns about high inflation triggering an economic recession continue to grow. Inflation has outpaced wages over the past 13 months, and the squeeze on consumers has become increasingly severe. According to foreign reports, US retailer Target is preparing to cut prices to clear inventory and cancel orders because the consumption recovery that occurred during the epidemic has passed and it is increasingly difficult for consumers to afford daily necessities. So far, U.S. consumer spending has been relatively good, but that has only been possible by tapping into savings and borrowing more. The U.S. savings rate is now down to 4.4%, the lowest level since 2008, and credit grew 7.5% last year, the highest level since 2011. At present, it is difficult to purchase and consume cotton upstream and downstream. The decline in cotton consumption is accumulating. We are just blinded by the supply of cotton, and it will definitely explode at a certain point in time.
Although the current decline in cotton consumption may exceed the decline in production, weather factors are still the dominant factor in the market during the cotton growing season. As long as the weather threat persists, the cotton market will be supported. Moreover, under the illusion of export data, the market is often numb to changes in downstream consumption. However, after the delivery of the July contract, the “ceiling” of the ICE futures market will be lowered, and it will be difficult for cotton to have the confidence to rise sharply.
</p
