In the second week of March, the cotton market was as calm as water for most of the time. Until Friday (March 11), the news about China’s issuance of an additional 400,000 tons of cotton import quotas for sliding tax processing trade was announced. ICE futures directly rose to 400. With the remaining points, it stood at 121 cents again. The December 2022 contract is not far behind and has now risen to near its previous high.
Last week, the author said in the weekly review that although the tension in Eastern Europe has made the market a little worried, in fact, the cotton market itself is very stable, and the price adjustment and decline in the past two years has been about a month. Last Friday’s huge increase The decline that began in early February lasted just over a month and indeed consolidated the market trend.
Whether it is the limited decline in the past few weeks or the rebound last Friday, what supports the cotton market has always been demand, or fundamentals. Judging from the U.S. Cotton Export Weekly Report, the Russia-Ukraine crisis has not affected the pace of U.S. cotton exports. Last week’s contract volume increased by 2% month-on-month and was 51% higher than the previous four weeks. China’s contract volume doubled from the previous week. More than twice that, the total contracted volume in the two years reached 40,000 tons. As of March 3, the United States’ committed sales for this year reached 13.28 million packages, completing 96% of USDA’s export forecast. The average for the same period in the past five years was 91%. In addition, although last week’s USDA supply and demand forecast did not reduce the U.S. ending stocks for this year as scheduled, it lowered global stocks by 377,000 tons, of which India’s production and stocks were significantly reduced. Therefore, the fundamentals for this year remain solid, and the impact on cotton prices It is still a strong support.
As the sowing period approaches, the impact of next year’s situation on the market is increasing. On the one hand, the drought in the United States continues to worsen. The National Oceanic and Atmospheric Administration predicts that there is a 53% chance of a La Nina climate in the northern hemisphere from June to August this year. Precipitation will also be limited in the next three months, and the entire southern United States will be under drought control. under. On the other hand, as energy and grain prices soar, the use of chemical fertilizers and the price comparison of grain and cotton have once again become prominent. U.S. industry experts said that expenditures on chemical fertilizers, irrigation, fuel and pesticides have increased by 50-300%, and the price of chemical fertilizers has increased by 50-300%. The cost of U.S. cotton production this year will double year-on-year. The original cost of US$800 per acre will be reduced this year. At nearly $1,600, the cost in C/A areas could be as high as $3,000/acre, making it unprofitable unless yields soar.
On March 15-16, the Federal Reserve begins to raise interest rates after its policy meeting, which may have an impact on the financial market. Cotton prices may face consolidation after rebounding, and the market needs to take precautions against this. In the medium term, under the influence of uncertain supply and demand forecasts for the new year and negative macroeconomic conditions, cotton prices will continue to maintain a range-bound state in the near future, and we will have to wait for opportunities to break through to new highs.
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