On March 2, ICE cotton futures followed other markets lower after opening. Metals and grains generally fell back under the pressure of profit-making. Cotton traders also closed their positions to make profits and adjust their positions. Earlier news that Russia and Ukraine were preparing for a second round of negotiations was one of the reasons for the sell-off in some markets.
On Thursday, the U.S. Department of Agriculture will release its weekly report on U.S. cotton exports. U.S. cotton signings and shipments were very good last week. Traders are looking forward to better performance this week to eliminate concerns about frustrated cotton demand. Some speculative bulls closed their positions before the report was released. Profit, causing cotton prices to fall sharply.
On the same day, Federal Reserve Chairman Powell stated in front of Congress that although the U.S. economy and the Ukraine crisis have brought many uncertainties, the Federal Reserve is still on the road to raising interest rates. He said that the employment situation is very unsatisfactory and inflation has exceeded the 2% target set by the Federal Reserve. So far, under the combined effect of interest rate hike expectations and investor risk aversion, the U.S. dollar index has risen to a one-year high. . On the same day, the rise in the U.S. dollar index also put downward pressure on the cotton market.
U.S. stocks closed sharply higher on Wednesday after Federal Reserve Chairman Jerome Powell suggested the central bank may raise interest rates less than some investors fear. Powell said he was leaning toward supporting a quarter-point rate hike in March, calming some concerns about the possibility of a more aggressive rate hike.
With spring approaching, traders are also keeping a close eye on weather conditions. Currently, there are widespread floods in Australia, while drought continues in the main cotton-producing areas of the United States. The La Nina climate may lead to higher temperatures and less rainfall from Texas to the Southeast.
Louis Barbera, partner and analyst at VLM Commodities Ltd., said there is an argument that demand will be destroyed and the U.S. cotton planting area will expand. Because of this, large funds are hesitant to buy cotton. Judging from the current situation, the impact of the Russia-Ukraine conflict on the market continues. The market needs to see a clearer upward signal from cotton fundamentals, and the probability of sideways trading in the short term increases.
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