Market Dynamics: The Cancellation Of American Cotton Contracts Increased, Traders Fell Into A Passive Position

According to feedback from cotton trading enterprises in Qingdao, Zhangjiagang and other places, since the middle of July, the phenomenon of buyers demanding to cancel contracts, re sign purchase contracts according to market prices or negotiate "buy back" contracts by sellers has continued to increase, including some cotton textile mills and old customers of middlemen who have been cooperating for many years. The contract performance rate has dropped again and again. Foreign businessmen also said that at present, not only China, India, but also The willingness of buyers from Turkey, Vietnam, Indonesia, Pakistan and other countries to implement the US cotton contract in 2021 / 22 is weakening, and canceling the early high price contract may become the focus of the recent game between the buyer and the seller.

An international cotton merchant said that there were three main reasons for the delay and cancellation of the US cotton contract signed in April / may / June

First, since the middle of May, ice cotton futures have plummeted, with the main contract in December falling from 133.79 cents / pound to 82.54 cents / pound. Some buyers entered the market at 110-120 cents / pound (December contract), resulting in a loss of about 20-30 cents / pound, which is difficult for buyers to accept and digest;

Second, the US Federal Reserve continued to aggressively raise interest rates (75 basis points in June and July respectively), including the sharp depreciation of RMB, Indian rupee, Vietnamese Dong and other currencies against the US dollar, which made the cost of cotton import even worse;

Third, since the second quarter of 2022, cotton textiles, cotton products and clothing of China, India, Pakistan and other countries have fallen into the dilemma of inverted production and sales, weak new orders, and obvious peak and fall of cotton consumption. As a result, demand has declined. Some cotton enterprises can only take measures such as delaying the performance of contracts and canceling contracts to alleviate the pressure of working capital.

If the cotton contract of a medium-sized cotton company in Huangdao cannot be executed after a certain cotton contract of 110 cents / ton is cancelled, or if the cotton futures contract of the medium-sized cotton company in Huangdao can not be executed in a certain short-term; Traders are very passive in this process. They can only focus on each contract signed in the early stage, communicate with customers and fulfill the contract as soon as possible; For the port bonded cotton, we should take measures such as reducing the base difference and increasing the bargaining space to stimulate the shipment and strive for "both hands should be grasped and both hands should be hard".

It is understood that the main contract of ice cotton futures is 85-95 cents / pound. A small number of international cotton merchants and large trading enterprises purchase bonded cotton resources at ports, mainly American cotton / Brazilian cotton.