According to a U.S. futures review article, as ICE cotton futures fell to the 83-cent line, cotton prices showed signs of stabilizing last weekend. With uncertainty surrounding favorable rainfall in western Texas, traders believe the market may be oversold. With prices falling below 85 cents, the market has entered a comfort zone awaiting more guidance on the outlook for new cotton production in 2021.
In the coming weeks, the market will pay close attention to weather, growth and the USDA’s June supply and demand forecast, but the real guidance on cotton production should be the June 30 U.S. actual Sow area report. Currently, USDA’s intended cotton planting area is 12 million acres, which is significantly higher than market expectations. Therefore, the market wants to know how much lower the actual planting area is than the intended area. Some analysts believe that the actual sowing area may be 2 million acres less than the intended area. Based on the abandonment rate and average yield in the past five years, the US cotton output this year is estimated to be around 15 million bales, with the highest possible reaching 17.5 million bales and the lowest Maybe 12.3 million bales. Since US opening stocks are only about 3 million bales, the production of 15 million bales can easily be absorbed.
While the U.S. cotton production is still unclear, some clues can be seen from the U.S. cotton demand situation. The volume of U.S. cotton contracts signed last week has increased significantly, and together with the contracts for next year, the total volume will reach 138,000 bales. However, U.S. cotton contracts for next year are the lowest in the same period in the past five years. This must be noted. It may indicate that global textile mills are considering that prices may continue to fall. At this stage, they are only maintaining a buy-as-you-use strategy and will not replenish forward inventories. .
According to the CFTC position report, as of May 18, the net long position of funds decreased by nearly 10,000 lots, most of which occurred on May 13-14. The current net long position has declined. to 46,000 lots, and the highest was 85,000 lots in February this year. Therefore, if it goes long again in the later period, the fund will have sufficient ammunition, and now it is just waiting for opportunities.
From the price trend, cotton prices are well supported below 85 cents until the market has a clearer understanding of US cotton production next year. At present, new US cotton flowers have just been planted, and the harvest is still far away. There will be a lot of uncertainty during this period. More rainfall is needed in the southwestern United States, and the delay in US cotton planting will also cause a series of problems in the later period, which requires close market attention. focus on. </p
