Cotton Prices Continue To Stabilize And Supply And Demand Forecast Next Week

In August 8th, the oversold ICE futures prompted some funds to liquidate, with some bullish bottom buying, and the market climbed slightly. Since Thursday, ICE futures have fallen by more than 600 points, but the market stabilizes on Tuesday. One of the reasons is that China's export data are good, and exports in July increased by 3.3% over the same period last year, much higher than 1.3% in June.

This week, the Central Bank of China adjusted the RMB to us dollar exchange rate to 7.0039 to 1, the lowest in nearly ten years. This will help to improve China's foreign trade export, and the US Treasury will therefore include China as a currency manipulator.

The US cotton export weekly released on the same day showed that China bought 60 thousand packs of cotton last week, though the number is small, but it is a "leader", and the market is very pleased with it. After all, this is the largest purchase in China for a long time. Psychologically speaking, China's purchase of US cotton will give comfort to the market.

According to statistics, a total of nearly 1 million 700 thousand tons of cotton neps in the previous year were transferred to 2019/20, of which nearly 50 thousand tons were carried out in China. In 2018/19, the total shipment volume of US cotton was 3 million 50 thousand tons, a decrease of 10% compared with the same period last year, of which the export of Upland Cotton decreased by 11%, and the export of Pima cotton increased by 5%.

In August 12th, the US Department of agriculture will issue a forecast of supply and demand. The market is expected to see a steady increase in US cotton output, a decrease in exports and an increase in stocks at the end of the year. At the same time, the recent improvement in India's monsoon rains and global inventories may continue to increase.

The market has fallen sharply in recent weeks, and investors may make a profit before the report is released. After the fall of the cotton price, speculative short positions may increase further, but it is not a signal to buy. From the technical and fundamental aspects, there will not be a lot of short term compensation in the market.