On January 19, ICE cotton futures surged to a 10-year high, and inflation expectations once again dominated the market. Some analysts say that currently a large amount of stock market funds have begun to shift to commodities, causing many commodities to become new hot targets. Last week, the USDA supply and demand forecast lowered US cotton production and inventory to continue to support the rise in cotton prices.
At the same time, many media have recently reported that India’s cotton production is lower than expected. India’s CAI has lowered the cotton production in 2021 by 3.5%. This is because new cotton encountered excessive rainfall and pests and diseases during the harvest period. Moreover, CAI has also raised India’s domestic cotton consumption forecast, which will reduce India’s excess supply for export.
On the same day, the U.S. dollar index fell again as traders began to prepare for next week’s Federal Reserve meeting. While the meeting is not expected to bring any surprises, the Fed may formally begin a new era of raising interest rates to combat inflation.
Currently, oil prices have risen to a seven-year high, and problems with the oil pipeline from Iraq to Turkey have raised concerns about crude oil supply. Turkey’s state pipeline operator Botas said on Tuesday it had reduced oil flows at the Kirkuk-Ceyhan pipeline after an explosion, the cause of which was not yet clear.
On January 19, ICE cotton futures closed sharply higher. Fundamentals continued to lead the market to stage a perfect storm. First, the fundamentals showed an oppressive rise, then USDA lowered US cotton production, then India also reduced production, and finally The huge increase in the cost of new cotton production has shocked cotton farmers. All of these situations point to reduced acreage, lower production and, therefore, higher prices. On that day, the main March contract reached a maximum of nearly 125 cents, the highest since June 2011. In 2010/11, cotton prices hit a record high, rising to 227 cents.
This week’s U.S. cotton export weekly report was postponed to Friday due to Monday’s holiday. Last week’s weekly export report showed that net contract signings of US cotton increased by 400,000 bales, and shipments rose to 167,000 bales. Both data were higher than the previous week’s levels. So far, high cotton prices have not cooled down U.S. cotton exports.
At present, cotton prices are in a stage of skyrocketing, and market risks have increased sharply. People involved in cotton are reminded to take precautions against risks.
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