US Cotton Area Greatly Reduced Cotton Prices Began To Rise?

US industry experts wrote that the report of the US Department of agriculture's coverage area released in June 30th made the market a big surprise. According to the report, the sown area of US cotton in 2020 was 12 million 185 thousand acres, a decrease of 11% over the same period last year. The intention area in March was 13 million 700 thousand acres, which was basically the same as last year.

Most analysts believe that the intention area in March is obviously high. Considering the sharp fall in prices at the beginning of the year, the actual area should be lower than the intended area, but never expected to be as low as 12 million 180 thousand acres and 1 million 500 thousand acres less than the intended area. Before the actual coverage area was released, the market was widely expected to be 13 million 200 thousand acres.

The planting structure of different states in the United States is different, and the production process and the type of land also determine where and what should not be planted. In general, the reduction of sowing area to a certain extent is the result of the increase of other crops, such as maize, soybean, sorghum and peanuts, but at the same time, some areas originally intended to grow cotton do not sow because the soil is too dry or too wet.

The actual area of Texas has decreased by about 700 thousand acres compared with the intention area at the end of March, and the intention area increased by 300 thousand acres in March. According to us crop experts, considering the price, weather and other factors, Texas's area decreased by 400 thousand acres over the same period this year.

No matter how surprising the sown area of the US cotton is, the reality is that the US cotton area is lower than the market expectation. Such a sharp reduction will definitely set off a wave of gains. Looking further ahead, the growth of American cotton has great influence on yield per unit area and yield. It is also a key factor in the later stage. This week, the state of Texas has improved slightly and the proportion of poor seedlings has declined, but the overall situation is deteriorating this year.

In 2019, the output of US cotton was 19 million 910 thousand bales. According to the actual sowing area of 12 million 185 thousand acres in 2020 and the average yield per five years and the abandonment rate, the output of US cotton could be 17 million 300 thousand packs. If the yield is above the normal level and the yield is below the normal level, the output of US cotton will reach 1900-2000 bales this year. Therefore, even if the US cotton area is much lower than expected, the market should also pay close attention to the report of the US cotton seedling, which is very important for guiding cotton production.

The reduction of the US cotton area is only one of the reasons for the rise in cotton prices. Whether we can continue to rise in the late stage depends on the export situation of US cotton, whether the cotton consumption is stable and the market's confidence in defeating the new crown epidemic situation. At present, the ICE futures contract for December is the second time to break 61 cents this year, and the future market will fluctuate around 61 cents based on the above analysis factors.