Foreign Trade News: ICE Panel Is In A Stalemate, Foreign Cotton Import May Still Have To Wait

In the past week or more, some cotton trade enterprises in Qingdao, Zhangjiagang and other places reported that the port bonded The spot and shipment (US dollar resources) inquiry/transaction has gradually improved compared with November and December.

In addition, influenced by the fact that Zheng Mian's CF2505 contract broke the 13500 yuan/ton and 13400 yuan/ton threshold again this week, and driven by the decline of the external market, the RMB quotations of Brazilian cotton, American cotton and other cotton that have been cleared by the port were also lowered. On the whole, the activity of inquiry/effect of bonded and non bonded foreign cotton at the port is rising.

Although the contract of ICE's main force in March was deadlocked near the 68 cents/pound pass, it was judged that it was still not the best time for cotton enterprises and traders to sign contracts to purchase foreign cotton, and it still needed to "trade time for space". In the short term, it was not ruled out that ICE's main force could try 65 cents/pound. The reasons are summarized as follows:

First, the USDA report may continue to significantly increase the global cotton output in 2024/25. China, India, the five Central Asian countries, and the United States have underestimated their cotton output in 2024/25 (especially China, whose output has some upward space in December).

Second, Trump's "second visit to the palace" on January 20, 2025, before the implementation of the policy of imposing tariffs on imports from China and other countries and China's counter-measures, it is not recommended to sign contracts to purchase foreign cotton on a large scale in the market (except for rigid needs with export traceability orders).

Third, the short position atmosphere of ICE cotton futures is relatively thick, lacking the attention of long funds. The latest weekly position report released by the CFTC showed that the net short position of cotton held by hedge funds and large speculators in the week ended December 31 was 34591, 2819 more than the previous week, hitting a new three-and-a-half month high

Fourth, the expectation of the Federal Reserve to cut interest rates continued to weaken, which was also not conducive to the continued rebound of ICE cotton futures. It was difficult to stabilize 70 cents/pound in the short term. According to CME's "Federal Reserve Observation", the probability of the Federal Reserve keeping interest rates unchanged in January is 88.8%, and the probability of cutting interest rates by 25 basis points is 11.2%. In last month's economic forecast report, Federal Reserve officials predicted that interest rates would be cut only twice in 2025.

Of course, the market also needs to pay attention to the recent rise in crude oil and agricultural product futures, which will bring some support to cotton's stability, especially the good performance of cotton substitutes PTA, polyester staple fiber, etc.