Market Situation Abrupt ICE Cotton Futures Market Rebound Accelerated Pace

8/9 months, research and investment institutions, cotton related enterprises and other ICE futures, the 2019/20 cotton market bearish and worried mood is strong, and even judged that once the thirteenth round of Sino US trade negotiations in mid October failed to achieve substantial progress, the main contract of ICE will break 60 cents / pound to 56.59 cents / pound before (ten years low 54.19 cents / pound), because the total volume of cotton in the northern hemisphere countries such as the United States, India, West Africa, Brazil and other countries in the year of 2019/20 will be substantially increased.

But in the short half a month, the market situation, the mentality of the cotton enterprises and speculators have changed significantly. The "quantitative change" to the "qualitative change" has made the parties unable to catch up. The main trend of ICE's rebound has been formed (65, 68 and so on). The key reason is no doubt that the thirteenth rounds of Sino US negotiations have made substantial progress and reached the first stage agreement (in the fields of agriculture, intellectual property protection, exchange rate, financial services, expanding trade cooperation, technology transfer, dispute settlement and other fields), and the US stock market, finance and commodity average goods have risen sharply in response to this positive 60. But I believe that ICE rebound is also supported by the following three cotton Fundamentals:

First, Pakistan's cotton production dropped sharply in the year of 2019/20 and its quality dropped sharply. Pakistan will buy a lot of cotton and Brazil cotton in large quantities. Some institutions and international cotton traders said that the actual output of Pakistan in 2019/20 was down by more than 30% over the same period last year. Under the unfavorable conditions such as the cotton production in Australia and the decline in quality indicators and the tight relationship between India and Pakistan, the dependence of the cotton mill on imports of us cotton is expected to increase substantially.

Two is the total cotton production in India in 2019/20 or significantly lower than expected, USDA report also needs to be amended. Several India ginning factories and exporters reflect that since the end of 9, the rainfall in Gujarat is more than 29% above normal level. Flooding may lead to a reduction of 25-30% in peanut and cotton production in some parts of the country. The output of central cotton and other major cotton producing areas is also threatened, so the total output of India in the year of 2019/20 is below 6 million tons.

Three, Texas was suffering from low-temperature frost and intensified drought in the southeast cotton region, and cotton production in the United States was overestimated. It is estimated that the temperature of Texas's main cotton growing area will be reduced to below freezing point this weekend, which will affect not only cotton harvest but also yield and quality. Two international cotton traders said that the USDA forecast for the 2019/20 cotton production in the United States was 4 million 726 thousand tons (obviously 18.18% higher than that in 2018/19). Considering the effects of frost and continuous drought, the actual output will be less than 4 million 500 thousand tons, and it is difficult to judge whether the lint quality can meet the requirements of the textile enterprises and traders.