Last week (February 14-18), the trading characteristics of ICE cotton futures were the imminent delivery of the March contract and the geopolitical situation. The military actions between Russia and Ukraine on the Ukrainian border made the market nervous, and the disk price also followed the situation. Fluctuate due to changes in prices, and rollover transactions in the March contract also put some pressure on the market. After a week, cotton prices fell under overall pressure, closing lower for the second consecutive week.
The Ukrainian border issue has indeed brought some panic to the financial market, and cotton itself will inevitably be affected. As analysts said, the market is worried about what impact this will have on cotton demand. In the final analysis, the cotton market has always been driven by demand. If demand is always there, even if supply increases and external interference occurs, it will eventually evolve into recovery and increase. This has been the case for many years, from the financial crisis to Sino-US trade. From friction to the new crown epidemic, every major event has had a huge impact on cotton demand, and ultimately cotton consumption has returned to the right track. The so-called right track means that driven by economic recovery and population growth, cotton consumption will continue to increase in the long term.
U.S. cotton company J.Berrye Worsham recently stated that by 2030, the growth in global cotton demand will push U.S. cotton exports to more than 18 million bales, and to achieve this goal, U.S. cotton must expand production. The implication is that the increase in cotton area is not simply a rise in prices, but mainly driven by demand. According to recent forecasts from the National Cotton Council (NCC), the intended cotton planting area in the United States will increase by 7.3% in 2022. Despite this, it is still unclear whether U.S. cotton production will increase year-on-year. Based on the average unit yield and 18.9% abandonment rate in the past five years, US cotton production in 2022/23 is expected to be 17.3 million bales, while the output in 2021/22 is 17.62 million bales. The recent persistent drought in Texas, USA, has pushed the ICE futures December contract to rise from 90 cents to a maximum of 105 cents. After the cotton price fell last week, the decline was smaller than that of the main contract. The price difference between the near-far month contract has become more obvious. shrinking trend. If the actual sown area in the later period is lower than expected, or weather speculation resumes, it is very likely that the ICE futures December contract will catch up with the front-month contract, and the new and old years will be smoothly handed over in four months.
Since the Spring Festival, the decline and consolidation of ICE futures has lasted for more than two weeks, and the price has not fallen significantly. After the main May contract fell from 124 cents to 119 cents, it rebounded strongly last Friday, and the price It rose back above 121 cents. From the current point of view, although U.S. cotton exports have continued to decline in recent weeks, it does not mean that cotton demand has dried up. With the reopening of the European market, end demand will recover again, driving the production and exports of major textile countries, and cotton consumption will also increase. will gradually return to normal. Although the adjustment and fall in cotton prices this time has digested the early overbought pressure to a certain extent, compared with the deep correction at this time a year ago, the current decline is far from enough. When the real opportunity for speculation and bullish factors appear, Previously, the market may remain weak in the near future. What the market needs to pay attention to this week is the delayed release of the US cotton export weekly report and the weekend’s USDA Agricultural Outlook Forum’s preliminary judgment on the next year’s market.
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