Cotton Supply Continues To Improve In The New Year, And The Agreement Between China And The US Is Expected To Be Signed Next Year.

In July 29th, the market did not show any hope for the upcoming twelfth round of Sino US economic and trade consultations. ICE futures fell sharply after opening, and only recovered part of the lost territory.

On the 30-31 th of July, the Sino US talks will be held in Shanghai. The US side still wants the Chinese market to be fully open, protect the intellectual property rights of the United States, and China should fulfill the promise of WTO. In the short term, China and the United States have little chance of reaching an agreement, but with the negotiation going on, China still hopes to continue to buy some US agricultural products. The market is very much convinced that China will sign an agreement after the 2020 general election to avoid Trump's difficult president.

Traders believe that the US cotton growth has continued to improve, and it is difficult for China and the United States to reach an agreement. Although the India monsoon rainfall has a 30-50% gap this year, the output outlook is still far ahead of the previous expectations. Up to now, India's new cotton planting has been completed 10 million 900 thousand hectares, up from 10 million 200 thousand hectares in the same period last year, an increase of 6.86% over the same period last year. The main reason is that some farmers have planted illegal transgenic cotton, which can better resist drought. The United States Department of agriculture forecast in July that 2019/20 cotton production in India increased by 500 thousand bales.

This week also needs to be concerned about whether the Federal Reserve will cut interest rates. Although Trump has been demanding a rate cut in the past few months, the Fed has been ignoring it. However, taking into account the increase in tariffs has led to slower economic growth in the United States, this week does not rule out the Federal Reserve to cooperate with Trump to take relevant actions. Last week, the US cotton exports showed marked improvement, and China began to buy the next year's US cotton, but the problem was that the US dollar continued to be strong against the US cotton exports. At present, almost all countries in the world reduce the exchange rate of their currencies to the US dollar, many of them are zero interest rate or even negative interest rate, hoping that currency devaluation can stimulate exports.