Although last week’s US cotton export weekly report and USDA supply and demand forecast were both positive, ICE futures unexpectedly fell sharply on Monday (April 12), caused by a sell-off in the external grain market and the possibility of favorable rainfall in western Texas. The market retraced sharply, with trading volume reaching 70,000 lots.
The latest CFTC position report shows that fund long positions fell further to 52,000 lots last week, the lowest level since October last year. At this point, the fund’s net long position has declined for six consecutive weeks. Funds are still heavily short-selling despite promising cotton fundamentals, which may mean that funds have lost interest in cotton.
At the same time, the economic recovery of various countries after the epidemic has been full of uncertainty, making traders very cautious. Currently, the COVID-19 epidemic has worsened again in many places in the United States, and the market is worried about a new round of blockades. In addition, the number of new confirmed cases in India has also reached a new high, the epidemic in Brazil is basically out of control, Argentina has been hit hard, Bangladesh has begun a new blockade, Pakistan has increased restrictions, Turkish hospitals are overcrowded, and the number of deaths in Italy has reached a new high this year. Mutated viruses are spreading in many countries around the world, and the market is also worried about the future process of economic recovery. At the same time, global political and economic tensions have also been holding back the market.
The weather forecast shows that temperatures will be low and rainfall will be high in Texas in the next 6-10 days, but the areas with high rainfall will decrease significantly in the next 8-14 days. Nonetheless, analysts believe that strong global exports and consumption, coupled with possible declines in production, are fundamental factors that support higher cotton prices in the longer term, and cotton prices may remain range-bound in the near term.
Overall, the current cotton price is competitive, and price fluctuations can be smoothly transmitted and digested in the supply chain, which is conducive to cotton consumption. As time enters the later part of the year, the tight spot supply of cotton will become increasingly prominent. In the medium to long term, if the weather in Texas improves, the December contract is expected to receive solid demand support around 75 cents. Textile mills preparing to purchase should take advantage of every price correction to replenish inventories from August to December in a timely manner. </p
