The Reduction Of American Cotton Area Has Become Consensus

ICE cotton futures contract entered delivery in March, and cotton market rose slightly after opening. The latest CFTC position report shows that the fund bought about 3000 hands last week, and the net short position decreased to 57386 hands.

With the delivery of the contract in March, the cotton market trading sentiment turned to neutral and moderate. Traders focused on this week's fourth quarter US GDP data, US cotton export weekly report and USDA agricultural outlook forum forecasts. Up to now, the total export sales volume of American cotton in this year has reached 9.44 million bales, lower than 10.447 million bales in the same period last year, and the average in the same period of the past five years is 12.04 million bales. The US cotton export has completed 92% of the USDA export forecast, with an average of 93% in the same period of the past five years. This Friday, the US personal income and expenditure data that the Federal Reserve most values will be released, which will accurately reflect the US inflation situation. Data released earlier this month showed that the US CPI in January significantly exceeded the 2% inflation target set by the Federal Reserve. In recent weeks, the rise of the US dollar has been restrained. Trump's tariff threat has not been fully realized. Only 10% tariffs have been imposed on Chinese goods, which has delayed the imposition of tariffs on Mexico and Canada. The separate tax increases on other industries are also far below market expectations.

In terms of weather, with the approaching of sowing, the weather in the United States and the growth progress of crops in Brazil will be concerned in the coming month. At the end of winter and early spring this year, the desert areas in the southwest of the United States, southern California, western Texas, and southern Texas all need rainfall to ensure sufficient soil moisture during spring sowing. In addition, parts of the southeast of the United States are also drier than in previous years, which also requires rainfall. From the current situation, the lack of rain in western Texas will last at least until the first half of March.

Analysts believe that due to low cotton prices, high production costs and drought in the United States, the reduction of cotton area in the United States this year has become the consensus of the market. This psychological expectation provides support for the cotton market to a certain extent. In addition, if the Trump administration can successfully negotiate a trade agreement that includes increasing cotton purchases, demand may increase. This week, the market will welcome the USDA Outlook Forum. The market will focus on the changes in planting, supply and demand in the United States and the world in the new year.