Global Perspective: Cotton Market Follow-Up Need To Pay Close Attention To The Northern Hemisphere Sowing Situation

 

From the importance of the influencing factors, the decline of cotton inventory at the end of the period or the decline of US dollar index are the necessary factors to start the market. The increase of net position of fund provides assistance for the first two types of necessary factors, while crude oil only plays a role in promoting the periodic market.

Looking back on the current situation, the Federal Reserve will officially complete the QE exit this month, and open the way to increase interest rates. The monetary policy factors gradually turn from positive to negative. At present, the strong expectation of interest rate increase has appeared on the disk.

According to the U.S. Department of agriculture's supply and demand report in March, the global supply and demand pattern of cotton is still maintaining a tight balance, and the low end inventory is an important support for the high volatility of cotton prices. If the subsequent global consumption demand is lower than expected, the planting area of new crops will increase significantly, or the high cotton price will be loosened.

If consumption and supply factors change in the same direction, or continue the concussion of cotton market. The latest CFTC report shows that there is no obvious upward or downward trend in net positions of funds, and funds are in a wait-and-see situation without clear driving factors.

Due to the influence of recent geopolitical situation, crude oil has maintained a strong upward momentum, but the trend of cotton has deviated from that of crude oil in early February, and the boosting effect of subsequent crude oil on cotton will gradually weaken.

Combined with all the factors, whether the new cotton production can change the declining trend of global final inventory is the focus of the market in the future, and the production situation in Brazil and the confirmation of sowing area in northern hemisphere countries should be closely followed.