Special report: U.S. cotton ups and downs
Western Futures 2024-04-18
Since late December last year, ICE cotton futures have shown a wave of "roller coaster" market. After a limit on February 27 and a limit on March 1, the May contract rose from 79 cents/lb to a maximum of more than 103 cents/lb, an increase of about 28%. During the Spring Festival, U.S. cotton strongly exceeded 90 cents/lb, hitting a new high since September 2022. In March, affected by the large-scale sell-off of managed funds, U.S. cotton fell to a new low in this round of correction. From 15:00 on April 3 to 8:00 on April 7, the ICE U.S. cotton 05 contract fell from 90.71 cents/pound to 86.24 cents/pound, a decrease of 4.93%, becoming the first place in the list of overseas agricultural products, returning to the price level before the Spring Festival holiday.
Foreign media called this round of decline "most of the selling pressure comes from speculative liquidation and technical selling".
Figure 1: The main daily candlestick of ICE U.S. cotton futures
Data sources: Wind, Western Futures
Since the United States and Brazil, the world's two major cotton producers, have overlapping planting areas for cotton, corn and soybeans, the level of cotton-grain price comparison will determine the planting area of competing crops. Due to the current cotton grain price ratio is at a relatively high historical level, from the actual price comparison situation, the planting willingness of cotton farmers this year will most likely not decrease, and the new cotton is more likely to expand the planting area. We believe that the USDA may raise its estimate of U.S. cotton acreage in its June acreage report, and that U.S. cotton may have greater potential to increase production if the weather is cooperative.
Huatai Futures: The external market continued to fall, and domestic cotton prices were passively under pressure
Yesterday, the price of Zheng cotton fell weakly. On the one hand, the US dollar continued to strengthen on the macro level, putting pressure on U.S. cotton prices, and on the other hand, the long positions of funds continued to fall, and the profit-taking situation continued to increase. However, the tight state of U.S. cotton inventories has not been broken for the time being, and there is no drive for a sustained sharp decline in the short term. Domestically, the current domestic cotton supply is relatively sufficient, but there is an expectation of a reduction in cotton production in the new year, and the judgment that the long-term market supply is tight has gradually strengthened. In terms of consumption, the peak season in March was not prosperous, which dragged down cotton prices, but the downstream order situation improved after April, and the inventory of finished products was slightly reduced recently, supporting the strengthening of domestic cotton prices. However, the current sales progress of ginning mills is still slow, and there is strong hedging pressure to continue to rise. On the whole, although the short-term supply is loose, the market during the planting period of new cotton may further trade the weather and planting area, and the market still has expectations for the "silver four", and the short-term support for Zheng cotton is strong. However, the recent weak trend of the external market and the widening of the price gap between inside and outside have limited the driving force for Zheng Mian to continue to rise. On April 18, the main contract of Zhengmian fell 235 yuan to close at 15,935 yuan / ton, falling below the 10,000 mark.
The recent market trend of Zhengmian's main contract
The United States launched a new Section 301 investigation against China, and the Ministry of Commerce: The accusations of the United States are simply untenable
According to the website of the Ministry of Commerce, on April 17, U.S. time, the Office of the U.S. Trade Representative (USTR) announced the launch of a Section 301 investigation against China's maritime, logistics and shipbuilding industries.
On the evening of the 17th, the spokesperson of the Ministry of Commerce issued a statement on the launch of the Section 301 investigation by the United States against China, saying that China is strongly dissatisfied with this and firmly opposes it.
According to Xinhua News Agency, the so-called "Section 301 investigation" originated from Section 301 of the U.S. Trade Act of 1974. This provision authorizes the USTR to initiate an investigation into another country's "unreasonable or unfair trade practices" and, if the investigation is concluded, to recommend unilateral sanctions to the President of the United States.
Previously, the United States launched a Section 301 investigation against China during the previous administration, and then imposed tariffs. On April 4, 2018, China's Ministry of Commerce (MOFCOM) formally launched the WTO dispute settlement procedure by submitting a request for consultation to the WTO Dispute Settlement Mechanism on the proposed taxation under the Section 301 investigation by the United States against China.
In the joint petition, the union said: "After nearly 50 years, the number of commercial shipyards in the United States has plummeted by more than 70%, tens of thousands of jobs have been lost, and tens of thousands of workers have lost their jobs. The United States now produces only one percent of the world's commercial vessels, dropping to 19th place in the rankings. ”
According to Dentons' trade remedy team, the U.S. side's claims focus on the following aspects: First, in terms of direct trade measures, the U.S. side requires a port fee for Chinese-made ships, and the applicant suggests that USTR impose a fee on each Chinese-made ship calling at a U.S. port, suggesting that the port fee should be determined according to the tonnage of the Chinese ship, and that the cost of the new ship is higher than that of the old ship.
Sun Lei, a senior partner in Dentons' trade remedy team, said that the main expected goal of the U.S. domestic industry this time is to urge the U.S. government to increase policy and subsidy support for its domestic shipping and shipbuilding industries.
Sun Lei said that after the 301 investigation was launched, the duration was about one year.
On how Chinese companies can respond to this problem, he said that companies can strengthen their awareness of global layout and increase investment in overseas markets, especially those countries or regions that are less affected by trade remedy measures, so as to reduce their dependence on any single market.
For example, by establishing or expanding manufacturing bases in other countries, companies can gain the opportunity to bypass potential tariff barriers, while also diversifying the risks of potential trade remedy investigations by exporting to multinational markets.
Source: Ruida Futures Research Institute, China Cotton Network, Yicai
Editor: China Yarn Network New Media Team
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