The New Year Is About To Start, Can Cotton Price Recovery Continue?

On July 20, after last week's big fall, the cotton market tried to stabilize. At this stage, on the one hand, the market has to face the tension between China and the United States, on the other hand, it has to face the possibility of a substantial reduction in production in Texas.

However, the ambassador strongly protested against the implementation of the US China agreement in the first stage. For Texas, the weather forecast shows that extreme high temperature and dry weather are maintained in western Texas. The market is expected to turn worse last week.

According to the latest CFTC report, as of July 14, the net purchases of funds reached 8300, and the net long positions reached 29817, 7200 and 44455 respectively.

On July 20, under the influence of dry and hot weather in most cotton producing areas of the United States, ice cotton futures rose sharply, and fund bulls contributed most of the buying. Due to the extremely high temperature and almost no rainfall in Texas, the market is expected to significantly reduce cotton production in Texas. In addition, the southeast of the United States also began to enter the high temperature, the second largest cotton producing state of southern Georgia in the past two weeks, and the temperature has begun to close to 40 degrees.

Cotton traders were very upset about US cotton export data this week. Last week's report showed that the net contract signing of US cotton was already a net negative number. Although it is understandable, China has only signed 38000 packages for the new year, which may indicate that Sino US relations are in a dangerous situation. China may stop purchasing or even cancel some US cotton contracts. In that case, no matter how the weather changes in the United States, the supply of next year will be more than enough and it is difficult to find a buyer 。

In terms of raw material purchasing in the early stage, the cost of raw materials imported from all over the world has been greatly reduced due to the low demand of raw materials in China. Market participants believe that with the gradual end of China's procurement, ice futures may enter a downward channel. The new year will start in two weeks. Whether the demand can recover as scheduled still needs to be observed. In any case, cotton prices should be lower than the current level under the impact of a sharp rise in ending inventory.