According to CFTC statistics, with the recent decline in ICE cotton futures highs, the number of ON-CAll point price contracts in 2021/22 has rapidly fallen from 113,428 to 106,641, a drop of 5.98% in just one week, including China, Pakistan, Buyers from Vietnam, India and other countries are enthusiastic about bargain hunting.
An international cotton merchant said that due to the in-principle agreement between U.S. President Biden and Russian President Putin to hold a summit to discuss the security situation in Europe and the gradual opening of borders between Europe and the United States, the global economy, trade, and transportation continued to pick up, and Southeast Asian countries such as Vietnam and Pakistan The demand for cotton imports is still very strong. Therefore, although ICE has fallen below 120 cents/pound in stages, this round of bottoming has ended, and the probability of rebounding at 120 cents/pound has increased. What needs attention is the Federal Reserve’s interest rate meeting in March. Will it raise interest rates by 50 basis points or 25 basis points?
Judging from feedback from cotton trading companies in Qingdao, Zhangjiagang and other places, the total cotton inventory at ports has continued to show a slight increase since mid-February, and the increase in storage capacity pressure has not been obvious. Since all 894,000 tons of 1% tariff quotas in 2022 have been issued and the remaining 1% tariff quotas in 2021 can only be extended to the end of February, bonded cotton stocks at ports have continued to decline recently, while non-bonded cotton stocks have grown rapidly.
Industry analysis shows that on the one hand, the quantity of 2020/21 Brazilian cotton arriving and stored in Hong Kong in January and February is very strong, and 2020/21 and 2021/22 Indian cotton stocks are also growing slowly; on the other hand, although ICE’s main contract has increased from 129.37 US dollars cents/pound fell back to 118.76 cents/pound (the intraday low), and the price difference between domestic and foreign cotton narrowed. However, due to the start of production at consumer terminals such as weaving, clothing, and foreign trade companies, the situation of receiving new orders was lower than expected, and Zheng cotton CF2205 rebounded sharply. The withdrawal of nearly 1,000 points has triggered an increase in cotton textile enterprises and middlemen’s price replenishment operations of domestic cotton. In addition, traders have quietly raised the basis difference of customs-cleared cotton. Therefore, the trend of “bonded cotton has dropped and non-bonded cotton has increased” continues.
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