On May 12, ICE cotton futures closed slightly higher, with the US Department of Agriculture’s supply and demand forecast providing support for the market.
According to USDA forecasts, U.S. production will decrease slightly in 2020/21, exports will increase, and ending stocks will drop to 3.3 million bales. U.S. cotton production increased to 17 million bales in 2021/22, exports decreased to 14.25 million bales, and ending stocks dropped to 3.1 million bales. Global ending stocks fell in 2021/22, and total supply was the lowest in the past five years.
In terms of weather, the probability of rainfall in western Texas in the United States is getting higher and higher. The rainfall over the weekend may be more than ten millimeters, which will put pressure on the market. Rainfall in the delta may reach more than 50 millimeters in the next five days. Overall, most areas of Texas will receive more rainfall in the next 6-10 days and 8-14 days, with normal rainfall in western Texas. Because the soil is too wet, some farmers in the delta said that they need at least 10 days of dry weather before sowing, otherwise a considerable amount of cotton will miss the best sowing period.
The U.S. CPI rose by 4.2% year-on-year in April, the largest increase since September 2008, which was much higher than the 3.6% expected by analysts. One of the reasons was the low base of the previous year. On that day, the three major U.S. stock indexes plummeted, and the market believed that ultra-high CPI might trigger the Federal Reserve to raise interest rates. However, the Federal Reserve believes that the current rapid growth is unsustainable and will not affect monetary policy.
As for Thursday’s weekly US cotton export report, there will not be much US cotton available for export later in the year, and the market will focus on US cotton shipments. According to market analysts, under the influence of the epidemic in India, global textile mills have become more cautious in purchasing, and the output of most exporting countries around the world will increase significantly next year, so U.S. cotton exports still have a long way to go.
The USDA supply and demand forecast on May 12 showed that the ending stocks of soybeans and corn were higher than market expectations, resulting in a sharp decline in the grain market, and the rise in cotton seemed to be somewhat weak. If the weather in the U.S. cotton-producing areas continues to improve, the market needs to pay attention to the possible increase in U.S. cotton production in the next few months, and at the same time beware of the negative impact of the out-of-control epidemic in India. Overall, the current rising power of cotton prices is insufficient. In the absence of special favorable factors, the market may be difficult to surpass the previous high of 95 cents. </p
