ICE Cotton Futures Break Ten Years Low Price Probability Is Very Large.

Since the beginning of August, the global stock market, financial, commodity futures and bond markets have launched another round of competing diving, which has repeatedly made innovations. The ICE cotton spot December contract did not unexpectedly break the key point of 60 cents / pound, once dropping to 57.26 cents / pound, hitting a new low since April 2016. It is only one step away from the lowest point of 54.19 years in the ten years. The panic and anxiety of cotton growers, cotton processing enterprises, traders and investors continue to ferment. The differences between institutions and cotton related enterprises are relatively large. Whether or not to break 54.19 cents / pounds has become the focus of controversy and judgment. Hedge and hedge operations are increasing.

The author believes that at present, whether ICE or the whole commodity futures market can not fundamentally control the short-term market trend, in addition to the interest rates triggered by the Federal Reserve's interest rate cuts and the weather triggered by the central bank's "currency drain" and the weather uncertainty of the main cotton producing countries, ICE can be described as "a rat in the air", so the probability that ICE will break the ten year low point is very large.

First, as the total debt of the US government continues to soar, the United States is on the brink of economic crisis. As of today, the total debt of the US government has risen to 22 trillion and 570 billion US dollars and is out of control. This debt scale has exceeded the total amount of GDP in the United States in 2018. Moreover, with the Trump administration's "militarism", the global economic conflict and the global attractiveness of the US debt, the US economic recession has accelerated.

Second, USDA will continue to sharply reduce global cotton consumption and raise 2019/20's final inventory. With the escalation of trade wars between China and the United States, intensified tariff conflicts between the United States and Europe, and trade between Korea and Japan, not only China's cotton consumption has declined rapidly, but also Southeast Asian countries such as India, Pakistan, Vietnam, Bangladesh and so on are also in a state of weak or even negative growth in cotton demand, which is superimposed with the increase in output of cotton, cotton and West African cotton in the United States this year, resulting in the fact that the fundamentals of global cotton are not only bad, but also very poor.

Third, the implementation of 2019/20 signing of the United States cotton is becoming more and more difficult, breach of contract, buy back or postpone the performance or become normal, ICE was "hit the rocks". Since April 2019, the ICE futures contract has fallen from 77.45 cents / pound to 57.26 cents / pound, down 19.89 cents / pound, or 25.48%, and the contracted buyers can be described as "heavy losses" and easy to retreat. Therefore, the default (loss contract margin, general 5-15%) or repurchase by the seller will become an important choice. Of course, there will be a small number of contracts directly pushed into the 2020/2021 year. For ICE, the bad profits will only increase.