Is The Cotton Bull Market Over After The Three Falls?

Last week (March 22-26), some commodities including cotton fell sharply, and fund bulls continued to close their positions at the end of the first quarter. Cotton prices in January to February this year excellent performance, at this time the callback is normal, but the decline is a little too big.

From February 25 to March 26, ICE Futures adjusted to the "full moon", and there were three limit falls in a month. In the recent week, the main hot spots in the market were the slowing down of cotton sales in the United States, the tension between China and Western countries, and the rainfall in Texas, the United States. All of these were the main reasons for the price drop. However, after the cotton price fell below 82.78 cents, it triggered a large number of technical sales, which also led to the cotton price limit on March 25.

At present, the economic and market fundamentals have not changed, but cotton is now struggling to return to 80 cents, whether the cotton bull market has ended? Ice's December contract has fallen 9 cents since it peaked at 88 cents more than a month ago. However, after falling nearly 400 points on March 25, 219 points rose the next day, which may be a good phenomenon.

After this big drop, there should be a large number of transactions between American cotton and non American cotton, and the remaining inventory of American cotton will speed up to the bottom. With the sharp fall in prices last week, cotton demand will increase significantly, which is expected to make cotton consumption exceed production in 2021 / 22, which is a very important supporting factor for fundamentals. It should be said that the current price can make the consumption proportion of cotton increase slowly, so it is more favorable to the long-term trend of price.

Foreign analysts believe that after the callback, cotton bull market will return, cotton supply and demand side is also conducive to the price trend. This week's focus is on the USDA's intention to plant cotton acreage on March 31, when futures prices were still 80-85 cents in December. In February, the U.S. Department of Agriculture said it expected to plant 12 million to 12.5 million acres.