Since the start of the pandemic a consensus has emerged: the world will be a different place once it is over. Public debt will no longer be a problem and will not be a burden for our children. On the Commodities Markets there is no longer need for a shortage of supply to get the markets moving up. Even if these scenarios seem hard to believe, we must deal with them moving forward. 

The cotton market demonstrates this in the aftermath of what can be described as a "neutral" supply/demand report published by the USDA. Despite this neutral report the market continued to move up, with some rather aggressive swings in a single days trading. Last week the March contract finished up 453 points. 

Two points that could explain this: 

• From a technical standpoint we should remember that ICE is only a measure of American cotton even if the futures market serves as a reference for all cottons produced globally. However, the United States has experienced a fall of nearly 25% in production compared to the USDA’s first estimates. Phase I of the Sino-American trade agreement further stimulated sales of American cotton, which mechanically pushed the market to year highs, further fueled by the hedge funds. 
• From a more pragmatic point of view, the consumption figure used by the USDA appears to have little connection with economic activity during COVID 19. Some people in the US even question the relevance of the figures provided by the Department of Agriculture.

In such a context we then have to question: 

• - Indian cotton is the most competitively priced in the world yet why is it i struggling to find homes? Coincidentally, over the weekend the Pakistani authorities maintained a ban on the import of Indian cotton. 
• - Why in Bangladesh have imports decreased by a third from over the course of a year? Consumption of West African cotton has fallen there by 40%, which was Bangladesh’s favorite imported cotton. 
• - What impact will the decision to boycott cottons from Xinjiang have on prices? 

The paradox of such a situation is the probable dichotomy that could prevail: on the one hand the futures market should continue its march towards $1/Lb, yet on the physical market we believe a collapse in basis levels is more than possible. 

The question is no longer how far will this market go but for how long will it last?