February 7-11 is the first week after the Spring Festival in the Year of the Tiger. As the delivery date of the March contract approaches, ICE futures index funds have rolled over their positions on a large scale, and the front-month contract has obviously come under pressure. Overall, whether it is fundamental, technical or macroscopic, it has a somewhat bearish impact on the market. ICE cotton closed lower for the first time after nine consecutive weekly gains, and the Xinhua December contract performed relatively strongly.
Last week, there were two main news in the international market, one was the USDA supply and demand forecast, and the other was the US cotton export weekly report. Judging from the supply and demand forecast, this adjustment is not significant. The increase in US cotton inventories and the decline in exports are within market expectations. U.S. cotton exports overall still look good, shipments have not slowed down, and concerns about logistics crises are slowly fading.
However, the fading of this concern will bring about another concern. As logistics problems are gradually resolved, US cotton spot goods stranded at ports will continue to arrive at their destinations. As raw material inventories increase, textile mills will not be too eager to purchase spot goods, and the misalignment of supply and demand caused by logistics will tend to normalize. . With global planting and production expected to increase next year, and with a large amount of new Brazilian cotton coming on the market after the second quarter to supplement supply, U.S. cotton will inevitably face more intense competition if it wants to continue exporting large quantities of cotton, which will inadvertently bring a negative impact on cotton prices. potential pressure. Cotton prices may hit a top before this supply situation changes.
From the perspective of the downstream market, with the excessive rise in cotton prices, terminal retail consumption has shown signs of weakness, and the U.S. CPI hit a 40-year high in January. Expectations of monetary policy tightening have further increased, and the financial market has become nervous. The potential for market volatility is increasing. Although the Fed will give the market enough time to digest the negative effects of the interest rate hike, the risks when the interest rate increase actually occurs must be guarded against. Overall, this year’s macroeconomic outlook is unfavorable for rising prices.
With cotton supply turning from tight to abundant and macroeconomic factors unfavorable, it will be very difficult for cotton prices to continue to break through and rise. The faster the market rises, the sooner it will reach the top. It is also worth noting that the sharp rise in crude oil, grain and gold prices last Friday failed to drive cotton prices to follow suit. Instead, ICE futures continued to weaken. Recently, the military actions of the United States and Russia on the Ukrainian border have attracted market attention. The Biden administration has warned American citizens to leave Ukraine. The US Dow Jones Index, which has just stabilized, has plummeted for two consecutive days. Although cotton has no major impact for the time being, if the situation develops beyond As expected, anything can happen, and the geopolitical situation may become a “black swan event” this year.
Starting from the end of December 2021, cotton has risen continuously for more than a month. Since the Spring Festival in the Year of the Tiger, cotton prices have been in a slow decline process after a brief surge. The recent decline and consolidation took a long time. At present, the market temporarily lacks factors and new motivation to continue to rise, and there has been a considerable increase in the early stage. Funds also need to take profits at a certain time, and the market needs to take precautions against this.
February 7-11 is the first week after the Spring Festival in the Year of the Tiger. As the delivery date of the March contract approaches, ICE futures index funds have rolled over their positions on a large scale, and the front-month contract has obviously come under pressure. Overall, whether it is fundamental, technical or macroscopic, it has a somewhat bearish impact on the market. ICE cotton closed lower for the first time after nine consecutive weekly gains, and the Xinhua December contract performed relatively strongly. Last week, there were two main news in the international market, one was the USDA supply and demand forecast, and the other was the US cotton export weekly report. Judging from the supply and demand forecast, this adjustment is not significant. The increase in US cotton inventories and the decline in exports are within market expectations. U.S. cotton exports overall still look good, shipments have not slowed down, and concerns about logistics crises are slowly fading. However, the fading of this concern will bring about another concern. As logistics problems are gradually resolved, US cotton spot goods stranded at ports will continue to arrive at their destinations. As raw material inventories increase, textile mills will not be too eager to purchase spot goods, and the misalignment of supply and demand caused by logistics will tend to normalize. . With global planting and production expected to increase next year, and with a large amount of new Brazilian cotton coming on the market after the second quarter to supplement supply, U.S. cotton will inevitably face more intense competition if it wants to continue exporting large quantities of cotton, which will inadvertently bring a negative impact on cotton prices. potential pressure. Cotton prices may hit a top before this supply situation changes. From the perspective of the downstream market, with the excessive rise in cotton prices, terminal retail consumption has shown signs of weakness, and the U.S. CPI hit a 40-year high in January. Expectations of monetary policy tightening have further increased, and the financial market has become nervous. The potential for market volatility is increasing. Although the Fed will give the market enough time to digest the negative effects of the interest rate hike, the risks when the interest rate increase actually occurs must be guarded against. Overall, this year’s macroeconomic outlook is unfavorable for rising prices. With cotton supply turning from tight to abundant and macroeconomic factors unfavorable, it will be very difficult for cotton prices to continue to break through and rise. The faster the market rises, the sooner it will reach the top. It is also worth noting that the sharp rise in crude oil, grain and gold prices last Friday failed to drive cotton prices to follow suit. Instead, ICE futures continued to weaken. Recently, the military actions of the United States and Russia on the Ukrainian border have attracted market attention. The Biden administration has warned American citizens to leave Ukraine. The US Dow Jones Index, which has just stabilized, has plummeted for two consecutive days. Although cotton has not experienced a major decline for the time being,However, if the situation develops beyond expectations, anything may happen, and the geopolitical situation may become a “black swan event” this year. Since the end of December 2021, cotton has risen continuously for more than a month. Since the Spring Festival in the Year of the Tiger, cotton prices have been in a slow decline process after a brief surge. The recent decline and consolidation took a long time. At present, the market temporarily lacks factors and new motivation to continue to rise, and there has been a considerable increase in the early stage. Funds also need to take profits at a certain time, and the market needs to take precautions against this.
