The market was strong over the course of the week settling at 67.64 c/lb, up 1.82 c/lb on the December contract. 

President Donald Trump made a hasty recovery from the Coronavirus and will now head out on the campaign trail again with the election only three weeks away. The fate of a much needed stimulus financial package seems unclear and changing from day to day. The feeling is that an agreement will eventually be made, without knowing exactly when. 

The most significant action for the cotton market has again come from the US. Hurricane Delta has dumped a huge amount of rain in the Southern states, highlighted in the graphic below. The bolls are open in the most part and so we can expect to see lower yields and qualities from those areas hit badly.

The WASDE report released on Friday was certainly not in line with what many traders were expecting to see. Most commentators were expecting the US crop to be reduced from 17 million bales to around 16 million bales, after numerous storms going through the southern belt. This did not happen and the US crop was left unchanged. Productions were reduced in WAF, mostly Mali, Greece and Pakistan, as expected. The most surprising element was that consumption was increased for the coming year, with India and China seeing larger numbers. Demand has been improving but we do not feel that we are anywhere near the levels pre pandemic. 

In terms of the cotton trade, we have again seen good demand coming in from Pakistan for mostly lower grade styles from Brazil but also West Africa. China returns from holidays this week so it will be interesting to see whether they maintain their purchases of US cotton, at the time of writing the ZCE remains very strong and Shanghai stocks are up 2.5%. There were several successful West African tenders last week as growers tried to take advantage of the stronger market. 

For some time we were in a market that was controlled by influences outside of the cotton market. Huge government stimulus packages provided massive liquidity into all markets including cotton. With such a driving force Speculators and Index funds turned to be net buyers of cotton futures providing support that has elevated prices on NYF. However, we are now at a place where storms have battered the US crop, reducing production with perhaps more cuts to come. World ending stocks are being reduced in line with the lower productions, further helped by China who has been taking in large quantities of the US and Brazilian crops. With the fundamentals on the cotton market getting tighter, and with the potential for more stimulus packages around the corner, we can perhaps expect to see ICE move into the 70’s in the not so distant future.