On February 22, ICE cotton futures surged to a new high after opening. After the release of last week’s USDA outlook report, market optimism further increased. Factors such as continued improvement in demand, competition for land for grain and cotton, and optimism in external markets continue to trigger speculation.
According to the USDA outlook report, U.S. cotton production in 2021/22 increased by 2.5 million bales year-on-year to 17.5 million bales, but ending stocks are expected to drop from 4.3 million bales to 3.8 million bales. With corn and soybean prices rising to record highs, rising cotton prices have become more urgent. Although there is still some time before planting, the current weather and soil conditions in the main producing areas of the United States are very unsatisfactory. Analysts believe that as time goes by, the area of US cotton will further decrease.
As of February 11, the contracted volume of U.S. cotton exports this year has reached 92% of USDA’s forecast, and the average of the past five years is 80%. Moreover, China’s imports have not completely stopped in the week before the Spring Festival, and the contracted volume still reaches 4.4 million bales, and the cumulative contract volume this year has reached 4.55 million bales. Traders expect that China will return to the market for purchases after the long Spring Festival holiday.
On the same day, the U.S. dollar index fell again, and the technical graphics trend became increasingly ugly. However, after Federal Reserve Chairman Powell spoke to Congress, investors were worried about his attitude towards world economic growth and interest rates in the post-epidemic period. If the U.S. economy grows too fast, it could force the Fed to tighten policy too quickly. The CFTC position report shows that as of the week of February 16, funds had a net long position of 68,568 lots and a net purchase of 335 lots. The previous high of net long positions was close to 80,000 lots, so bulls still have the potential to continue buying. </p
