Since late February, the main contract of ICE cotton futures has “collapsed” and plunged after hitting a two-and-a-half-year high of 95.60 cents/pound. On March 9, ICE’s intraday low was 84.32 cents/pound, which was lower than the annual high. 11.28 cents/pound, a drop of 11.8%. The liquidation of long positions by funds triggered a stampede, and the panic was obviously amplified.
The sharp correction in cotton prices this time was mainly due to negative influences such as the rebound in U.S. bond yields, which prompted a rebound in the U.S. dollar, and the USDA cotton supply and demand forecast report, which was lower than expected. However, as ICE falls into the 80-85 cents/pound range, buyer purchases are expected to grow explosively (especially the ON-CALL point price contract will have the opportunity to be released), which will be conducive to stabilizing the market and gaining momentum for a rebound.
According to feedback from several cotton traders, affected by the sharp correction in ICE futures, the tight 1% tariff cotton import quota, and the tightening of credit for some cotton textile companies after the Spring Festival, some contracts have recently been signed to purchase cargo. The progress of customer delivery of , bonded and even customs-cleared cotton continues to slow down, and the risk of default has increased significantly. Some buyers negotiate with traders to lower the contract transaction price (supplementary contract attachments) or have the seller repurchase it. Some buyers require traders to postpone the shipment of cargo and extend the contract execution period. The performance of high-quality US cotton and Brazilian cotton US dollar contracts faces certain challenges. pressure.
An international cotton merchant said that in the past week or so, not only has the willingness of Chinese textile companies and traders to implement contracts declined, but the enthusiasm of yarn mills in Vietnam, Pakistan, Indonesia and other countries to receive goods and clear customs at ports has also declined. It is not uncommon for foreign cotton export companies and traders to passively “buy back contracts” (the purchaser provides appropriate compensation to pave the way for continued cooperation in the future). Some cotton-related companies believe that once ICE’s main contract falls below 82 cents/pound or even 80 cents/pound, it will trigger a large number of contract breaches, buybacks or postponements of contract performance, and applications for arbitration and claims may increase significantly.
From the survey, the current quotation of US cotton 31-3/31-4 36 in Qingdao, Zhangjiagang and other places is higher than the 2020/21 Xinjiang cotton 31 grade “double 28” 300-500 yuan/ton (The settlement price difference between net weight and common weight has been taken into account). The wait-and-see sentiment of Chinese buyers has increased, and the fulfillment period has been postponed. </p
