In the past three trading days, ICE cotton futures have started a strong bottoming out rebound mode with the back of 80 cents/pound. The main March contract has made a “triple jump”, breaking through 80 cents/pound, 85 cents/pound, and 88 cents in a row. / pound and other levels, rose by 8.28 cents / pound, an increase of 10.38%, and the fund’s first target moved up to 90 cents / pound.
The author judges that from the perspective of external markets, ICE market sentiment and technical aspects, ICE’s short-term shock range is expected to rise to 90-100 cents/pound, but it is not appropriate to chase the rise and kill the shorts. For cotton companies and speculators, shorting on rallies The opportunity may come gradually.
Why did ICE cotton futures suddenly rise in a straight line, with the main contract going straight to 90 cents/pound? It can be briefly summarized as follows:
First, global cotton fundamentals are “overturned.” Recently, the temperature in the main cotton-producing areas of the United States has dropped sharply and rainfall has increased in the east. The market has become increasingly concerned about the production and quality of US cotton in 2022/23 and whether it can be shipped on time; as cotton production in the northern cotton areas of Punjab, Rajasthan and other states has hit record highs, Record lows (harvested) and the unit/total output of the central cotton regions of Gujarat and Maharashtra are significantly overestimated. Therefore, there are noisy opinions that India’s cotton production in 2022/23 will be significantly lower than USDA, CAI and other forecasts. In addition, the Australian Cotton Industry Organization predicts that Australian cotton production may drop to 5 million bales in 2023.
Second, with the continuous optimization and adjustment of epidemic prevention and control policies, China’s cotton imports showed a strong recovery from August to November 2022, with explosive year-on-year growth. Various institutions have strong expectations that China’s cotton consumption demand will take the lead in picking up in 2022/23. According to statistics, my country’s cotton imports increased by 106.78% and 85% year-on-year in October and November 2022 respectively.
Third, the Federal Reserve raised interest rates by 50 basis points in December, in line with the expectations of all parties. The negative news in the commodity futures market was temporarily diluted and the alarm was lifted. The U.S. dollar index fell. The overall commodity including ICE cotton futures rebounded, especially crude oil futures. Continuous rise against the market trend.
In addition, the recent forecast that the cotton planting area in the United States will decline significantly in 2023 has become an important subject of fund speculation. Informa, a well-known analysis agency, released a report, lowering the expected value of cotton planting area in the United States in 2023 to 11.2 million acres, a decrease of 18.8% from the 13.791 million acres in 2022; and from the survey of some Indian companies, the cotton planting area in 2023 The year-on-year decline is inevitable (mainly affected by the significant decrease in cotton planting income, the substantial increase in physical and chemical inputs, and the competition for land from other crops).
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