The market was subdued for the most part last week, settling at 89.66 c/lb on July, up 160 points. 

In India daily COVID cases remain very high but they are starting to ease which is a positive sign. 80% of yarn is usually sold domestically but this market has dried up considerably due to COVID related restrictions. Some mills are slowing down production and reducing working days with cotton consumption therefore expected to fall. Arrivals are now down to 20k bales a day suggesting the crop is coming to an end, though the CCI still have around 4.2 million bales in stock with their warehouses also at a standstill as operational staff remain at home, it could then take some time to get these operations moving again. 

A cyber-attack on an oil pipe line in Texas on Friday has completely halted the flow of oil to populous eastern states. This has sent Brent Crude prices soaring 2% on Monday and needs to be contained rapidly or the oil price could spike. 

The market was incredibly quiet until Thursday when the USDA announced season high exports of 472k bales. This puts exports at 12.4 million bales and therefore it seems likely the WASDE of this week will have to revise their US exports upwards. This report will be the first estimate placed on the US new crop with a Bloomberg survey average at 16.6 million bales. We might also see a lower global consumption, linked to COVID related lockdowns in Asia as well as possibly a lower cotton production in China. 

The weather market continues with eyes remaining on rains, especially in Texas. Welcome rains over the course of last week improved top soil moisture and may reduce abandonment but it seems that the US is still on for a small new crop. External factors do have to be considered as the strengthening corn and soy markets will take acreage away from cotton. If drought conditions remain and crop comes to 16 million bales then 2022 carryover could come to 3 million bales, which is a bullish figure. 

Demand side has been sporadic from Vietnam and Bangladesh but it remains poor. Eyes are on China to see how their new import quota may play out and which origins are set to gain from it. One origin that will certainly not benefit will be Australia as their relations with China continue to sour. Australia is trying to find alternative homes for cotton and the basis has drastically weakened as a result. 

Côte d’Ivoire announced last week that production is to increase by 4% for the 2021/2022 season, to around 250k mt of lint. This is in addition to the Burkina Faso and Mali higher production forecasts already announced, pleading for a strong production out of WAF for new crop. 

The market has stagnated within a range of 86 to 91 c/lb for the last couple of weeks. There is still an historically high unfixed on call sales position, corn and soy continue to rally and technically we are set up well for a move higher. We mustn’t forget however that rains or lack of them have played a large part in pricing on ICE but with more precipitation over Texas it may keep a lid on prices in the short term. 

With EID starting this week we may again be in for another quiet week. We take this opportunity to wish all our friends celebrating EID festivities a very happy celebration.