Market Observation: ICE Cotton Will Focus On The US Export Sales Report In The Coming Week

The cotton market remained quiet before the US Department of Agriculture (USDA) released the Global Agricultural Supply and Demand Report (WASDE) on Friday. The report finally provided a negative outlook for increased US production and rising ending inventories. External factors influenced broader market sentiment, including strong economic data, the avoidance of port strikes, and the strengthening of the dollar.

The March cotton contract on the Intercontinental Exchange (ICE) closed at 67.01 cents/pound on Friday (January 10), falling in the week.

In addition to WASDE report and export sales report, it was difficult to find new trading information guidance for cotton futures in March this week (January 3-9). ICE futures closed at the contract low this week, and selling pressure may be driven by the pricing of speculators and producers. In general, the market is quiet, and there is limited information affecting trading activities. Two way trading appeared in cotton trading, which has remained within the range in recent weeks. The following WASDE analysis is not part of the weekly market report; However, I think its importance to the market is worth reporting when it is released.

The number of positions increased by 5150, and the total number of positions reached 243422. According to the data released by ICE, the inventory of No. 2 cotton contract deliverable by ICE as of January 9 was unchanged at 20113 bales.

The January supply and demand report released by the US Department of Agriculture on Friday showed that the US cotton output in 2024/25 was estimated to be 14.41 million bales, and 14.26 million bales in December. The export of American cotton is estimated to be 11 million bales in 2024/25 and 11.3 million bales in December. The ending inventory of American cotton in 2024/25 is estimated to be 4.8 million bales, and 4.4 million bales in December. The inventory/use ratio is currently 37.5%, indicating that supply and demand are loose.

From the perspective of output, the largest increase in output in the United States came from the southwest, with an increase of 170000 bales to 4.55 million bales. The output of Texas increased by 200000 bales to 4.1 million bales, and that of Kansas increased by 10000 bales to 200000 bales. However, Oklahoma production decreased by 40000 bales to 250000 bales.

Globally, the US Department of Agriculture reported that the global cotton output in 2024/25 was estimated to be 119.45 million bales, and in December it was estimated to be 117.39 million bales. The global cotton ending inventory in 2024/25 is estimated to be 77.91 million bales, and 76.02 million bales in December. The total global cotton use is estimated to increase by 100000 bales to 115.89 million bales. The global inventory/use ratio climbed to 67.2%, easing the pressure on global supply and demand.

One notable change is the increase in China's output, which increased by 1.8 million bales to 30 million bales. It was previously speculated that China's cotton production was much higher than the reported figure. At the same time, China's imports decreased by 500000 to 8 million packages. It is worth noting that China is not included in this year's export sales report, and the increase of domestic production is one of the factors.

The minutes of the Federal Reserve meeting are generally tough, showing officials' concern about inflation. They pointed out that the uncertainty surrounding trade and immigration policies will lead them to adjust interest rates cautiously, which indicates that any interest rate cut will be gradual as they assess the situation.

American dockworkers and shipping companies reached a preliminary agreement to avoid a port strike that could disrupt the American economy. After the temporary shutdown in October last year, the two sides held negotiations for several months to prevent another shutdown. Although the details of the agreement were not disclosed at that time, the two sides had worked hard for several months to reach an agreement before the deadline of January 15.

There was positive news on employment in the United States, with 256000 new jobs, much higher than the market's expectation of 165000. The stock market fell as employment data reduced the possibility of the Federal Reserve cutting interest rates.

The strong US dollar continues to be a negative factor for US commodities. The strong US dollar has reduced the competitiveness of commodities, especially cotton, in the export market. The strength of the US dollar against the global currency is supported by the strength of the US economy relative to many other countries and the uncertainty of the potential impact of upcoming tariffs.

The export sales of the United States showed that exporters' exports of cotton in 2024/25 reached the annual market high.

The export sales report released by the US Department of Agriculture on Friday showed that in the week ended January 2, the net export sales of US cotton in the current year increased by 137400 bales, 7% higher than the previous week, and 27% lower than the average of the previous four weeks, of which the net export sales to China increased by 3700 tons. Next year, the export sales of American cotton will increase by 0 million bales. The export shipment of American cotton was 191700 bales, an increase of 66% over the previous week and 47% over the average of the previous four weeks, of which 43800 bales were exported to China.

Recently, the shipment has been at a low level, but as the holiday has passed, the growth rate of the shipment has gradually accelerated.

Although sales were slow, the US export mandate was consistent with historical trends.

6400 bales of Pima cotton were sold and 8300 bales were shipped for export. The shipment is expected to meet the USDA's estimate.

In the next week's outlook, traders will focus on the US export sales report and begin to turn their attention to the intention of planting new crops.

Next week, the US will release producer price index, consumer price index (CPI) and US retail sales data for December.