Sino-US trade negotiations in September or cancellation of the cotton market pressure

On August 9, ICE futures fell slightly. Apart from the suspension of Sino-US trade negotiations, violent conflicts and unrest in Hong Kong, China, which began for several weeks, began to spread to financial markets. The market is not sure when the problem can be completely solved. In addition, China's PPI fell by 0.3% year-on-year in July, but the CPI rose by 2.8%, which is unfavorable for both consumption and production.

The 2019/20 year has already begun. The US cotton export contract volume reached 7.46 million bales, the highest in 25 years. It has completed 47.3% of the USDA forecast and the average value of 39.7% in the same period of the past five years. Next Monday (August 13), the US Department of Agriculture will release a supply and demand forecast. Traders expect US cotton exports to be reduced by 500,000 bales, as China's future import demand is uncertain. Although China has signed a total of 1.8 million bales of cotton in the new year, which is basically the same as that of the same period last year, the market believes that the contract may be difficult to implement or eventually canceled.

In addition, the US cotton production may increase again. The US cotton market has been growing well since the last forecast of 22 million bales. However, the weather in Texas has once again attracted attention. The temperature in the next 6-10 days is high and the rainfall is less. The proportion of good seedlings has plummeted by 13%, and weather problems may have an impact on production, which will have a certain positive effect on prices.

On August 9, ICE futures closed down slightly, and the fundamentals and technical aspects were still extremely bearish. Even if the market was oversold next week, it would be difficult for cotton prices to return above 60 cents. This week, the ICE futures December contract fell 0.52 cents. On August 9, Trump hinted that the planned Sino-US trade negotiations in September may not happen, and he is not eager to solve the Sino-US trade issue, which is undoubtedly a big pressure for the market.