ICE Cotton Futures Lack Guidance, The Market Will Seek Breakthroughs

Since the middle of October, the main contract of ICE has continued to contract at 62-66 cents / pound, with 60 cents / pound support and 68 cents / pound top. Under the premise of lack of information and fundamental adjustment, the cotton market has entered a relatively quiet period. Only the USDA report has caused some waves.

On the one hand, the good agreement between China and the US has reached a gradual release. It is reported that the Sino US negotiating team is stepping up the development of the phased agreement text. The market speculated that Xi Jinping and Trump may meet and sign the agreement at the APEC summit held in Chile in November 16th. However, the international cotton traders, investment institutions and textile enterprises believe that the alarm can not be relieved until the two sides have signed the pledge. Whether the second stage talks can be opened as scheduled remains unchanged.

On the other hand, the basic adjustment of output, consumption, inventory and other basic aspects of the main cotton producing areas in the northern hemisphere is difficult to have new ideas (mainly in minor or even fine tune), and has little stimulation on the ICE disk. USDA reported that as of October 20, 2019, the cotton bolting rate in the United States was 93%, the harvest rate was 40%, and the growth rate was above 41%, which was significantly higher than that in 2018. The output and quality of cotton in Brazil, India, Africa and Central Asia were basically settled.

Considering that the US cotton signing export progress has reached 59% (USDA data) of the total export volume as predicted in October 10th, the quality of the US cotton in the middle and late stages can not meet the requirements of Chinese textile enterprises and traders, plus Pakistan, Vietnam, Indonesia, India and other countries' cotton mills "contend for food". Therefore, this year, we will increase the purchase amount of US $about 10000000000 of US agricultural products. Chinese enterprises will have a greater probability of purchasing from several large US cotton trading enterprises. (9/10, some international cotton traders expand their enquiries and orders for C/A, EMOT/MOT, ME and so on). Therefore, although the pressure on cotton storage in Qingdao, Zhangjiagang and Shanghai is relatively large, the annual arrival and storage volume of the US cotton 11/12/1 month is expected to continue to rebound and enlarge the pattern. From the speculation of some agencies and the statements made by relevant departments, China has promised to increase imports of US agricultural products to * 400-500 billion, including cotton, soybeans, pork, corn and DDGS.

For the factors affecting the short-term ICE trend, the industry analyzes: first, whether the Chinese side can go to the United States at the end of this month, finalize the first stage agreement with the United States, and prepare for the second stage agreement negotiation; two, the Federal Reserve's interest rate cut in October seems to have been "on the nail" (to achieve the interest rate "three successive falls"). Federal Reserve officials will hold interest conference next week. In addition to announcing further interest rate cuts, they will also explore whether enough measures have been taken to make the US economy strong enough to resist further risks of slowing down. Three, the United Kingdom has broken the European market or damaged global financial markets, stock debt markets and commodity futures. With the closing of the euro limit in October 31st, Britain's road to Europe has become increasingly difficult and unpredictable. British Prime Minister Johnson tried again to make the parliament vote on the new EU agreement on 21 th, but it was rejected by the speaker, as expected. Once Britain's prime minister has sought no agreement to succeed in Europe, the impact on Global trade, consumption and economy can not be underestimated.