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ICE Cotton Futures Upward Trend To Establish Gravity Or Ease Up

2019/6/20 10:36:00 24

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Since mid June, ICE cotton futures The main contract opened a hard rebound after a nearly three year low of 64.70 cents, and the center of gravity eased up. The 65-70 cent box became the focus of the two sides' stalemate and competition in the short term.

In June 18th, driven by the positive sentiment of the leaders of China and the United States calling for the release of positive trade negotiations, the international and domestic markets were jubilant. The three major indexes of the New York stock market closed up on the 18 th, and the Dow rose 350 points, or 1.35%, the S & P. index Up 0.97%, the NASDAQ index rose 1.39%. US oil closed up 3.4%, while domestic crude oil, iron ore, coking coal, cotton and so on also rose sharply, echoing ICE's intraday rise. ICE futures contract nearly broke 68 cents in December. Global financial markets, commodity futures and so on are full of expectations for the G20 summit, the resumption of trade negotiations between China and the United States and agreement.

Some international cotton traders and agencies believe that the G20 summit is expected to set the tone for commodities (including cotton), trade environment and the direction of adjustment of the financial and monetary system. Apart from the fundamentals, other factors affecting the trend of ICE will be gradually clarified, which is conducive to the operation of cotton enterprises and funds.

The author believes that the main contract of ICE is rising at a sustained rate of 65 cents, which has been established. The probability of trying and standing 70 cents in late June is relatively high. However, under the constraint of external environment, the ICE disk "three in two or three in retreat" is still unavoidable. The focus of the cotton trade will shift to a "stumbling block".

First, Chinese and US leaders may not be able to predict the outcome of negotiations on trade disputes during the G20 summit, but the US tariffs on imports of US $3000 are expected to be delayed. In June 17th, the US Trade Representative Office (USTR) held a seven day hearing on US tariffs on about 300 billion US dollars in goods exported to China. A number of delegates warned that tariffs would increase the cost of American businesses and consumers, and reduce the competitiveness of American enterprises, which is not conducive to the US economy and employment. What's more, it is really hard for them to leave China; the G20 summit between Chinese and US leaders will agree to restart trade negotiations and suspend tariffs on other imported commodities, so as to set up a "spanitional period" for negotiations.

Secondly, the cotton market basically digested and profits accumulated and began to play a role. In the year of 2019/20, not only the progress of US cotton planting slowed down significantly, but the amount of sowing in India was reduced by 9% over the same period, and the cotton area decreased by 9.4% compared with the previous year. In addition, in 2019, Australia's cotton production was expected to decline more than 50% over the same period last year, and the export volume dropped sharply. The Southeast Asia, China and South America, Turkey and other increased concerns about the supply of cotton in the next year; from the statistics of USDA, as at the end of May, the signing of exports of 2018/19 upland cotton reached 111%, and the oversold momentum continued. Despite the lack of support from the Chinese market, the demand for cotton mills in India, Vietnam, Turkey, Indonesia and other countries is still very strong, and the trend of "bright east" is obvious.

Third, the rise of staple agricultural products such as corn and wheat will boost ICE cotton futures rebound. Since May, it has been affected by large-scale rainfall in major production areas and the ban on the use of US ethanol gasoline in summer. In just two weeks, CBOT rose by nearly 15%, and corn futures hit a new high. Wheat futures also rose sharply (19% of the United States had planted corn to achieve seedling emergence, far behind the average of 49% in five years, and 5% of the planted soybean seedlings sprout, lagging behind five in average value 7%. The excellent and good rate of Winter Wheat in the United States is 66%, which is basically equal to the mean value of 64% in five years. Some agencies believe that the three major grain crops of the United States, wheat, corn and rice have been seriously affected by extreme weather this year, and a food crisis sweeping the globe is approaching.