In the week of December 6-10, market concerns about the “Omicron” mutant strain subsided, and ICE cotton futures stabilized following the external market. However, they seemed to have lost momentum after rebounding on Monday, with daily trading volume deteriorating and price fluctuations also significantly reduced. Small.
As of last weekend, the U.S. stock market and crude oil and other commodities have clearly stabilized, but the main March contract of cotton futures can only barely stand firm and seems to have lost some of its upward momentum. When the external market atmosphere gradually improves, the cotton market begins to pay attention After a sharp correction due to changes in its own fundamentals, the market needs more convincing supply and demand data to replenish ammunition for a renewed rise. However, last week’s supply and demand forecast and the weekly US cotton export report contained no surprises, so that prices fell for two consecutive trading days after the release of the two reports.
According to the USDA supply and demand forecast, although U.S. cotton production increased slightly this year, U.S. cotton exports and ending stocks have not changed. At the same time, global opening stocks were reduced, and production decreased month-on-month, so the ending stocks were reduced by 1.2 million bales. This seems somewhat mild and positive, but some foreign analysts believe that this is a manifestation of the current global supply chain crisis, and U.S. cotton shipments If it does not go out, it will accumulate into inventory, and global textile factories can only consume the existing inventory, and the inventory will naturally decrease.
However, the real negative factors seem to be less noticed – China’s cotton imports have been reduced by 250,000 bales month-on-month, and the expected import of 10.25 million bales is no longer enough to absorb the excess supply (10.55 million bales) from other parts of the world. You must know that China’s import demand is an important pillar of the current cotton bull market. If China’s import demand collapses, it will cause a serious blow to the market.
In 2020/21, China’s cotton imports are forecast to be 12.86 million bales, while this year’s forecast is only 10.25 million bales, a decrease of 20%. According to Chinese customs statistics, China’s cotton imports have declined month by month since June 2021, and the monthly declines have reached double digits since July. The import volume in October has dropped from 170,000 tons in June to 60,000 tons. Ton. So far, the large-scale imports from China that foreign countries expected have not happened. So far, the progress of U.S. cotton signings is quite satisfactory, but shipment volume has decreased by 44% year-on-year, and is 19% lower than the average of the same period in the past five years. According to the latest foreign news, the number of container ships queuing at ports in the western United States has increased to 127 (31 ships entering the port + 96 ships approaching the port), which is close to a record high. In this case, it will take longer for U.S. cotton export shipments to speed up.
The biggest focus this week is the Federal Reserve’s monthly interest rate meeting. In the face of rising inflation, what action the Federal Reserve will take on the Taper process is crucial to financial markets. However, 2021 has come to an end, and there is only more than a week left before the Christmas holiday. In the next few weeks, in the absence of special events, the probability of significant fluctuations in the cotton market is unlikely.
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