The market again lost ground this week but not as dramatically as in previous weeks. May settled at 49.99 c/lb, 279 points down in the week. 

The COVID-19 pandemic continues globally, and continues to shake financial markets. Supply chains are faltering, retailers are cancelling clothing orders and business is all but coming to a complete stop. 

Cotton NYF are not as low as they could be and this is perhaps due to the huge government support schemes that have been in place, propping up global markets. 

Despite near nonexistent demand, the USDA showed that the US cotton made steady sales over the last week, and although they were much lower than the previous week, they were not as bad as we expected. Shipments remained very good, which is encouraging as many origins, particularly in Africa are struggling with shipments due to the lockdowns in various countries. 

Performance issues remain for many merchants, not only are there high priced contracts waiting for LC’s but banks in many of these destinations are closed due to the lockdown. The risk of selling into a problem seems to have forced many merchants to stop offering cotton until such time that there is some clarity on where we might go. 

We have to assume that prices are going to remain weak for the rest of the year. Clearly there will be a drop in production numbers worldwide as farmers are not incentivized to plant at these levels. However, we also have to assume that it is the consumption number that will take the biggest hit. Supply chains can start up again rapidly but demand may lag somewhat. Consumers will have been financially hit by this crisis and demand for staple goods will return before it does for cotton. It isn’t unreasonable to assume that consumption could only be 100 million bales for 2020. 

For now the focus remains on the safety of all, and to contain the virus from spreading any further than it already has. Once the cases and deaths come under control globally then we should see a very gradual return to normality, however this could still be some weeks away.