Joe Nicosia, head of cotton at Louis Dreyfus, said at a U.S. industry conference recently that demand may decline as cotton prices rise to around 90 cents.
Joe Nicosia said that cotton prices have risen too fast recently, and ICE futures contracts for this year have begun to suppress demand for US cotton. Although cotton prices have fallen recently and Indian cotton has entered the export market in large quantities, the price is still only one step away from 90 cents.
Joe Nicosia said that as the economy showed signs of recovery, cotton prices began a long-term rise and exceeded the 70 cent level at the beginning of 2020. Although cotton prices plummeted during the epidemic, they have now returned to high levels, and demand is being suppressed as the situation changes.
Nicosia said that global cotton consumption is shifting from China to some countries such as Bangladesh, Pakistan, Vietnam, India and even Turkey, and the dependence of cotton trade on Chinese imports has also been reduced. This consumption The trend of growth will continue, cotton consumption outside China will continue to increase, and excess global supply will also encounter good demand.
Judging from the trend of cotton prices, Nicosia believes that the market is mainly affected by speculative forces in the short term. If the fund wants to add to its long position, the price will rise; if it wants to exit the market, the price of cotton will fall. In the short term, especially this year’s contracts will largely move in and out of funds.
Nicosia said that with the increase in contracts this year, India has exported more than 12 million bales of cotton. Due to extremely competitive prices, Indian cotton is seizing the export market of many varieties, directly threatening U.S. cotton exports, and the short-term demand for U.S. cotton exports has decreased.
According to Nicosia analysis, from a planting perspective, although cotton needs to compete with other crops for land, the cotton planting area in the United States in the new year will be higher than recent forecasts, mainly due to the recent excessive increase in cotton prices. , and the market also needs more cotton, but unless the weather in western Texas is very good, the ending stocks of US cotton next season will decline further. If drought conditions prevent cotton from being planted in Texas, cotton prices will skyrocket. As long as it doesn’t rain in Texas and China continues to implement the first phase of the trade agreement, it will be enough to keep cotton prices high, and ICE’s new annual contract has the potential to easily exceed 100 cents.
Nicosia predicts that the cotton market volatility will increase in the coming year. Generally speaking, cotton prices will fluctuate significantly as long as they are above 80 cents. </p
