Under The Epidemic, Cotton Futures Prices Are Expected To Stabilise Temporarily.

In recent weeks, ICE cotton futures showed a strong trend near the low point, and the pace of resuming work after the Chinese new year was slow. Investors expect that the central bank's actions to deal with the epidemic will pour liquidity into the market, and commodity prices will be supported.

The US Department of agriculture's supply and demand report is expected to reduce consumption in China, thus reducing global cotton consumption this year. China's consumption dropped from 8 million 380 thousand tons to 8 million 160 thousand tons, a decrease of 2.6%. Pakistan's cotton production is higher than expected, which has increased by 8% this month, so the import volume may be reduced. Affected by the decline in China's demand, India's cotton exports may decrease. Global end inventories rose by 3.2%, so ICE futures prices may continue to be under pressure.

In recent weeks, US cotton exports have maintained rapid growth and import demand from outside China remains strong. Although the supply of cotton is still ample from the data point of view, the United States is the only country that can export large quantities of cotton. This week, the first phase of the Sino US agreement will begin to take effect. From now on, whether China has begun to increase imports of US cotton is worth noting.

The US National Cotton Association (NCC) predicts that the US cotton planting area will be 13 million acres in 2020, down 5.5% from the same period last year, far below the estimated 20% of the US cotton grower magazine. According to the US Department of agriculture's latest long-term benchmark forecast, the US cotton area will remain at about 13 million acres in the next ten years.

At present, business activities in China and Asia have been significantly reduced, and it is difficult to restore China's gauze production, which may make the supply chain of textile industry suffer a significant impact. At present, China's import of cotton and yarn has basically stopped, and has also brought downward pressure on domestic prices in India. On the other hand, the Chinese textile mill is slowly returning to work. If the situation is good, the outbreak of the new crown virus pneumonia may take several weeks to complete. ICE futures and China Zheng cotton futures have stabilized because investors expect countries to inject liquidity into the market, thereby countering some of the negative effects of the new crown virus epidemic.