Since late December, ICE cotton futures have experienced “four consecutive positives”, with the main March contract breaking through 105-110 cents/pound and the trend of intra-body shocks has basically been established, and market sentiment has recovered again. According to CFTC statistics, as of December 21, the long ratio of ICE cotton futures rose to 30.5%.
Recently, although the trend of Zheng cotton has resonated and echoed with the strong rebound of ICE, it has obviously failed to get rid of the pattern of “strong externally and weak internally”. An international cotton merchant believes that this round of ICE’s main contract has been rising continuously at 105 cents/pound, which is related to strong demand from American households and holiday season consumption hitting a seventeen-year high. According to statistics, during the holiday season from November 1 to December 24, U.S. retail sales increased by 8.5% compared with the same period in 2020, the largest increase in seventeen years. Compared with before the epidemic in 2019, sales jumped by nearly 11%.
On the other hand, Pfizer’s Paxlovid pills and Merck’s molnupiravir have both received emergency use authorization from the U.S. Food and Drug Administration (FDA). The new coronavirus specific drugs have alleviated the panic of the market and investors. The U.S. financial market and stock market have closed higher for several consecutive trading days (the S&P 500 index hit a record closing high on Monday), coupled with the strong rebound in European and American crude oil, agricultural products, copper, zinc, lead, stainless steel and other precious metal commodity futures (on the night of December 27 Copper prices rose nearly 2%) and other positive factors supported the opening of the “skylight” of 110 cents/pound in ICE cotton futures, and the bottom of the main contract moved up.
However, with the sharp rise in ICE futures, not only have a large number of ON-CALL price contracts been forced to delay execution or even be canceled through negotiation between buyers and sellers (“buy-back” by international cotton merchants or exporters), but also because cotton textile companies cannot digest the excessively high prices. Due to the decline in cotton prices, we have reduced or suspended inquiries and delivery of cargo/bonded goods such as US cotton/Brazilian cotton/Australian cotton. Furthermore, the cotton import quota within the 1% tariff in 2022 has not yet been released, and there are not many textile companies and traders willing to “overdraft”. Therefore, a sharp increase in ICE may be beneficial to Indian cotton exports to the Chinese market in 2021/22.
Textile enterprises above designated size in Jiangsu, Shandong and other places said that although the continued rebound of ICE has caused some cotton traders to lower the basis of foreign cotton quoted in US dollars, the magnitude and intensity are obviously not enough, and they are not attractive enough to buyers, and market activity needs to be improved. .
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