After some shocks, ICE futures still closed higher last week, and prices were generally stable. On October 22, ICE futures rebounded after the sharp drop the day before. The market turned a blind eye to the surge in U.S. cotton contracts and only focused on the lag in U.S. cotton shipments, causing prices to plummet. This is very confusing.
Currently, the global shipping crisis is still intensifying. Traders feel that if you sell something but can’t ship it, what’s the use? Therefore, the market now has two completely different attitudes towards US cotton exports. As of October 14, U.S. cotton export sales in 2021/22 completed 8.009 million bales, lower than the 8.46 million bales in the same period last year, and 8.056 million bales in the same period in the past five years, completing 55% of the USDA forecast, and the average in the same period in the past five years. It’s 57%.
Although U.S. cotton export sales last week were quite strong, some of the benefits have been digested in the market in advance. From the data point of view, the United States has signed contracts for upland cotton to reach 391,800 bales, and China has signed contracts for 272,800 bales. According to market rumors, the actual data may far exceed this level, so subsequent data may remain at a very high level. Of course, these will also be within market expectations. Some people have begun to compare China’s current import demand with that of 2010, when ICE futures rose to more than $2/pound, but China’s ending inventory at that time was only 10 million packages, and the inventory-to-consumption ratio was 23%. According to USDA forecasts, This year, China’s ending inventory is more than 36 million packages, and the inventory-to-consumption ratio is more than 90%. Therefore, China’s import demand is far less urgent than last time.
For cotton prices to develop healthily and upward, the key lies in whether the increase in cotton prices can be transmitted downstream to the terminal. From the current point of view, the current price transmission has begun to occur. In the past week, the purchasing of yarn mills has been slightly active, bringing confidence to the spot market. That week, yarn sales in the international market increased and prices were also traded. However, this transmission was not caused by traditional supply and demand imbalances, but by logistics bottlenecks and the short-term supply tension caused by them. Now no one knows when the market will prove itself, perhaps only after the price enters a new equilibrium.
Currently, the high of the December ICE futures contract has dropped from 112.89 cents to 111.35 cents, while the low has dropped from 106.30 cents to 105.88 cents. If the price A fall below 105.50 cents may indicate that 111-112 cents is an important top price. </p
