After another volatile week on NYF, March finally settled down just 25 points at 70.40 c/lb. 

Last Monday global markets soared following the announcement of a potential COVID 19 vaccine with a 90% efficacy rate. Time will tell how this vaccine will develop, whether it will get the required approvals and then the obvious logistical constraints of vaccinating the global population. Scientists seem to agree that we may return to ‘life as normal’ by next winter. 

This good news has been somewhat blighted by the increasing COVID cases throughout Europe and US. The US recorded nearly 190k cases in one day on Friday. President Trump has said that he will not do a lockdown but with such alarming cases restrictions will surely by introduced. 

The WASDE report certainly threw us some surprises. The US crop was left unchanged at a 17.1 million bale projection, this is despite continuous storms and cold weather going through the southern states and most trade predictions having the crop closer to 16 million bales. Pakistan’s consumption was also reduced, despite the huge buying spree they have been on and India’s crop size remained unchanged despite anecdotal information that storms and pest attacks are reducing the crop size. 

The report was overwhelmingly bearish but the market remained unchanged, perhaps not fully believing the reported figures. 

The CCI in India is still holding cotton stocks of around 700k mt, with rumors that they are trying to sell a large chunk to Bangladesh for a December shipment. New crop arrivals have started in India with the farmers able to sell to the CCI at a 10 c/lb premium to what is achievable on the open market. It therefore seems obvious that the CCI will again build large stocks for the coming season. 

The USDA sales report showed good sales to a broad range of markets, with Pakistan, Turkey and Vietnam leading the way. For growths other than the US demand was stagnant as mills again take a back seat over fears of the continued lockdowns in Europe and the affects this could have on their garment orders. 

Last week we saw the index funds start to roll their contracts out of December and into the March contract, which lead to volatility. Open interest has only seen a drop of 6k contracts suggesting that the specs have maintained their long positions on the March contract, which is supportive to prices as we move forward. 

Talks are intensifying over a now urgent COVID 19 stimulus package in the US, with President Trump pushing for it on Twitter over the weekend. This added liquidity would certainly be a boost for cotton prices. 

Fundamentally and technically we believe that the market is well supported, however we do need to keep one eye on the virus and the lockdowns as this will only subdue demand further and the specs may decide to take their profits and head for the exit. 

On a separate note, this week we saw the signing of the RCEP deal between many Asian and Australasian countries, with China spearheading the agreement. The agreement is expected to cut tariffs between member states, increase global national income by $186bn annually by 2030 and add 0.2% to the economy of its member states. 

The US is not included in the deal but it could eventually affect the global trade of goods including cotton