ICE U.S. cotton futures prices rebounded to near 10-year highs on bets that strong demand will lead to a shortage of supply.
The U.S. Cotton Futures Brokerage Company said that hedge funds are currently actively buying cotton contracts, which means that this year’s commodity index structure may be beneficial to the cotton market. Funds’ net long position in cotton futures rose to a one-month high as of Dec. 28, government data showed.
Analysts say this buying stems at least in part from the severe shortage of ICE futures registered stocks, and that the United States continues to sell large amounts of cotton, mainly to China, Turkey, Vietnam and Pakistan, and the sales rate is still significantly higher than at this time of the year. average speed.
Since the end of December, the ICE cotton futures March contract has continued to rise, reaching a maximum of $1.1768 per pound, the highest level since November 17. The urgency of demand is reflected in the contract’s rare premium to the May contract, which is close to a record high.
Meanwhile, an indicator tracking China’s manufacturing sector rose for a second consecutive month in December after declining for much of last year. This is another bullish sign for cotton, as China is the largest user. It pointed to a “healthy pickup in commodity demand,” Kieran Clancy, commodities economist at Capital Economist, wrote in a note.
In 2021, cotton prices rose 44% on the year, the largest increase since 2010, as the market expected a second consecutive shortage of cotton supplies and global logistics bottlenecks hindered supply.
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