On January 26, ICE cotton futures rose modestly during the session as traders awaited the Federal Reserve meeting’s decision on raising interest rates. The Federal Reserve has made it clear for some time that it is necessary to raise interest rates to combat inflation. In addition, the situation in Ukraine also makes traders uneasy.
On the same day, the Dow Jones Industrial Index surged sharply after falling sharply in the past few days. Although investors wanted to see the Federal Reserve’s decision, the 5.5% rise in the share price of technology stock Microsoft still impressed the market. As a result, Apple, Amazon, Nvidia and Netflix all rose, bringing a generally positive atmosphere to the financial market that day.
On the 25th, ICE cotton futures closed more than 100 points higher. The Federal Reserve stated that an interest rate hike is imminent, but there is still no specific timetable so far. Therefore, the March Fed meeting may be the time node to announce the start of interest rate hikes. As soon as the news from the Federal Reserve came out, the Dow Jones Industrial Average rose immediately, while the U.S. Dollar Index weakened. Analysts said that if the U.S. stock market can stabilize, the cotton market will also stabilize and pursue higher prices.
This Thursday’s weekly U.S. cotton export report is of concern. Although last week’s contract volume dropped month-on-month, it is still higher than the average of the past four weeks, and U.S. cotton shipments rose to 198,000 bales. Traders are optimistic about the easing of the supply chain crisis. Confidence is also growing and we hope to see contract volumes and shipment volumes continue to perform well. As of now, the volume of U.S. cotton contracts is lower than the same period last year, but higher than the average of the same period in the past four years. Although shipments remain the biggest obstacle to U.S. cotton exports, traders are optimistic about future demand. In addition, the recent strong rise in crude oil prices is also a good signal for cotton’s fundamentals. In fact, some investment banks believe that oil prices will rise to US$100 per barrel this year.
Recently, some well-known analytical institutions have begun to release the intended planting area of US cotton. The National Cotton Federation will release its forecast at its annual meeting in mid-February. HIS Group predicts that the cotton area in the United States will be 11.845 million acres in 2022, up from 11.254 million acres last year. For U.S. cotton production, the size of the area is one thing. What really affects the market is the yield per unit area.
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