Intercontinental Exchange (ICE): Analysis Of The Future Trend Of Futures Cotton Market Volatility

According to foreign news on January 5, the cotton futures of the Intercontinental Exchange (ICE) fluctuated sideways in the holiday week, and prices rose in the near weekend. The market was supported by the unexpectedly strong export sales report released on Friday. The decline of the stock market, the weakness of economic data outside China, and the rise of the US dollar made the March contract on the defensive in the first trading day of 2024. The futures price fell 80.00 cents/pound, but cotton recovered some losses on Wednesday. On Thursday, the March contract came under pressure again, continuing the fluctuating trend in recent weeks. As of the week of January 4, the settlement price of ICE three-month cotton contract was 80.12 cents/pound, down 83 points. Total positions increased by 4518 to 199296.

　　 External market

Like the cotton market, the external market also lost momentum. After nine weeks of gains, it was on the defensive at the beginning of the year. The minutes released by the Federal Open Market Committee (FOMC) show that the Federal Reserve is still cautious, but members seem to generally believe that interest rate cuts will begin sometime in 2024. Crude oil prices also rebounded from recent lows as traders worried about supply issues. US President Biden announced the plan to purchase oil for reserve, which helped boost the price rebound. The labor market has released a series of economic data, with mixed results in employment. JORTS data shows that the number of job vacancies in the United States has decreased, indicating that the labor market is cooling. However, weekly initial jobless claims and US ADP employment data show that the employment market is still strong. The US nonfarm employment report was also better than expected, and wages were also growing steadily, which made the financial market's expectation that the Federal Reserve would cut interest rates from March to be questioned. The Bureau of Statistics of the United States Department of Labor said that the number of non farm jobs increased by 216000 in December. Economists surveyed had expected an increase of 170000. The economy will add 2.7 million jobs in 2023, far less than the 4.8 million jobs created in 2022. In 2024, one of the main factors that the external market needs to pay attention to will be to continue to monitor the actions that the Federal Reserve will take in terms of inflation and interest rates.

　　 Export sales

The weekly export sales report was postponed for the second consecutive week. Therefore, the sales discussed in this paragraph are not included in the above futures market activities this week. Sales are expected to slow due to holidays.

The export sales report released by the United States Department of Agriculture (USDA) on Friday showed that in the week ended December 28, the net export sales of American cotton in the current year increased by 131100 bales, 65% less than the previous week, 24% less than the average of the previous four weeks, and lower than the level usually reported at this time in previous years. The largest buyer is China, which exports 50700 packages to China, followed by 31800 packages in Vietnam, 25600 packages in Pakistan, 10800 packages in Bangladesh, and 4300 packages in Turkey. Export shipment also slowed down, but did not fall back to the level in the first few months of the year. 213200 bales of American cotton were shipped for export, 8% less than the previous week, and 15% more than the average of the previous four weeks, of which 147600 bales were shipped for export to China.

　　 Survey on planting area of cotton growers in 2024

The survey report of planting area in 2024 was released by the magazine Cotton Planters on New Year's Day. According to the survey, farmers are expected to plant 10.19 million acres of cotton in 2024/25, slightly lower than the current market year. In the southwest of the United States, Texas is expected to plant 5.6 million acres of cotton, Oklahoma is expected to plant 450000 acres, and Kansas is expected to plant 115000 acres. The biggest drop will be in the southeast, where the planting area is expected to decrease by 8%. This is the first survey this year on the expected planting area that deserves attention. More surveys will be released in the coming months to help people better understand the expectations of the next crop year.

　 Trend in the coming week

The US Department of Agriculture (USDA) will release the supply and demand report next week, which will become the focus of the market. The Ministry of Agriculture will also release the crop yield report, which will be the last update before the complete ginning, so the final data will be released. In addition to these reports, traders will also assist the US government in closing the export sales report and weekly export sales report next Thursday to see whether demand remains stable after the holiday.