USDA Is Doing Something Again. What About Cotton Price?

On August 12, the expected USDA supply and demand forecast was released. According to the market survey, analysts generally expect that the US cotton production will decrease, the export volume will increase, and the global inventory will increase. The US cotton production is expected to be 17.2 million bales, about 300000 bales less than last month's estimate. Therefore, the US cotton final inventory should be reduced to 6.3 million bales, lower than the 6.8 million bales estimated last month. At the same time, affected by the epidemic situation, the global ending inventory is expected to increase by 530000 bags.

Last night, USDA's forecast of cotton market is far from expected. Cotton production in the United States did not decrease, but increased to 18.08 million bales. As the abandonment rate of the United States increased from 16% to 24%, the cotton yield per unit area in the United States increased by 14% compared with that of last year, and the reduction in yield caused by hurricane in Texas of the United States is not worth mentioning. Due to the large increase in production, the U.S. final inventory increased from 6.8 million bales to 7.6 million bales. At the same time, global consumption decreased by 1.24 million bales, and ending inventory increased to 104.91 million bales, which exceeded market expectations.

After the 12-month ice contract, the range of supply and demand of ice futures rose sharply in the previous 12 months. Ed Jernigan, chief executive officer of cotton supply chain management, said US cotton is now much more expensive than Brazilian cotton, and countries are buying cheaper cotton, which has also pushed up US cotton stocks. As for the evaluation of the first phase agreement between China and the United States on Friday, although it is generally believed that China will continue to implement the agreement, he believes that the focus of the negotiation is soybean and corn, because China has already purchased a large amount of cotton, and in order to fulfill the agreement, it only needs to buy more later. Overall, the market is cautious about this. It is reported that the meeting will last from Friday to the weekend.

For this week's US cotton export weekly report, the market continues to expect China to continue to sign a large number of contracts, but what is more important is whether a large number of undelivered cotton last year is carried forward to this year or cancelled in large quantities.

After the adjustment of the supply and demand forecast, the global supply in the new year is further clear, and the United States and the global supply are more relaxed, forming new pressure on the fundamentals. In the case of slow recovery of cotton consumption, the resistance of cotton prices to continue to advance upward is increased.