Market Dynamics: ICE Cotton Futures Fell Back 75-80 Cents/Pound

Since May, the main contract of ICE cotton futures in July has fallen back to 75-80 cents/pound range for consolidation. Although institutions, cotton related enterprises and speculators still see the air atmosphere is relatively thick, the market has entered a stalemate and weak balance, and the momentum of stopping decline and stabilizing has begun to emerge.

With the release of such bad news as the USDA report predicts that the US cotton production will increase significantly in 2024/25, the global cotton supply and the inventory at the end of the next year will rise significantly, and the panic of long funds will be released, the traders' operation and the market will return to rationality, and ICE futures are expected to rebound after bottoming out at 75 cents/pound.

According to statistics, as of May 2, 2024, the cumulative contracted export of American cotton in 2023/24 was 2.7099 million tons (including Pima cotton), which reached 101.2% of the total export volume of American cotton predicted by USDA this year, and American cotton entered the "oversold" rhythm. According to the feedback from several international cotton merchants and trading enterprises, the main contract of ICE dropped to 75-80 cents/pound, triggering a large number of buyers from China, Vietnam, Pakistan, India, Indonesia, Turkey and other countries to buy into the market. If China increases the sliding tax cotton import quota, and the US cotton contract export in May July maintains a rapid growth, the serious "oversold" of spot goods will not only provide strong support for ICE, Moreover, it is not ruled out that bulls may be forced to hold positions in July contracts (currently, there are only about 100000 positions in July, while the daily turnover is between 15000 and 30000).

In addition, recent large-scale rainfall in some cotton regions in Australia has affected cotton growth to some extent. In addition, India's cotton planting area may decline significantly in 2024 (the cotton/grain ratio will weaken, and the competitiveness of oil crops, rice and other agricultural crops will become stronger), and China's cotton planting area will decline slightly, The industry believes that the USDA report overestimates the global cotton output in 2024/25, while the export orders of cotton textiles and clothing in China and Southeast Asia/South Asia continue to recover (the proportion of traceable orders is high), which also makes the futures price expected to stop falling at 75-80 cents/pound.