On April 27, ICE cotton futures opened higher and moved higher. The main contract once again exceeded 90 cents/pound (the intraday high was 91.66 cents/pound), setting a new high since March 4, 2021. According to industry analysis, due to the continued recovery of the net long ratio of funds, the lack of significant relief from the drought in the western Texas cotton area of the United States, the delay in sowing in the southeastern cotton area, the cooling of California, and the rise in wheat, soybean and corn prices to the highest level in eight years, ICE may continue. The market has oscillated and rebounded. After the main force stabilizes at 90 cents/lb, it is expected to test 93 cents/lb or even 95 cents/lb, steadily approaching the annual high of 96.22 cents/lb step by step.
The author believes that it is unlikely that the short sellers will easily give up the 90 cents/pound position. The long and short sides will still have a fierce confrontation and game around the 90 cents/pound mark. The amplitude of the oscillation may widen; only after funds and bulls establish a bottom and rise above 90 cents/pound, the market direction and investor sentiment will change significantly. The author believes that the rebound height of ICE still needs to observe the following factors:
First, the new crown epidemic is raging again in Europe, the United States, Brazil, India, Japan and other countries, and some countries have even lost control, which has a negative impact on the world. The impact on the economy, trade, transportation, and consumption cannot be underestimated, and the impact on the demand for textiles and clothing still needs to be observed;
Second, although the Fed’s expectations for interest rate hikes are higher than those in previous months, Cooling down, but tapering bond purchases is likely to be the first step. U.S. Treasuries unexpectedly rose amid strong economic data, which flattened the yield curve last week. There is strong demand for five-year and seven-year Treasury bonds. Before the Federal Reserve policy decision is announced on April 28, ICE funds are still very cautious in raising prices;
Third, some major cotton producing areas in the United States Abnormal weather and variable temperatures are encountered every year during the spring sowing period from April to May. It is common for a certain percentage of seeds to be abandoned in Texas. Therefore, funds and bulls speculate on the weather. It can be said that the weather “comes and goes”. There is still a big risk of area reduction and major production areas being affected. Variables, long and short are easy to reverse;
Fourthly, agricultural product futures have risen across the board, global food inflation has intensified, and countries have adjusted agricultural policies in response to rising agricultural product prices, especially corn and soybean import and export tariffs. . For example, Argentina is considering raising export tariffs on grains, Brazil is suspending import tariffs on soybeans and corn, and Russia is restricting grain exports and freezing food retail prices. However, the United States, the world’s largest grain exporter, has stated that it plans to carry out several reforms to encourage farmers to increase fallow areas. </p
