The market continues to drift settling at 53.02 c/lb, down 138 points in the week on the July contract 

Some lockdowns are starting to ease in Europe as the virus curve continues to flatten in most countries. President Trump also announced measures to begin slowly opening the economy in some states. With now over 2 million cases worldwide and no vaccine on the horizon it appears that even as lockdowns start to be eased life will not return to normal for some time.   

The market should react well to a gradual opening of the economy in the US, despite the fact that their unemployment figure is now at nearly 20 million. Even a partial opening of the economy will be well received by investors and should be supportive to markets. 

The virus has caused huge economic downturn in all countries. China announced a drop in GDP for the first time on record, India has also seen huge waves of unemployment as migrant workers have been released from their factory jobs. Everyone is affected by this virus, and as we all stay at home demand for goods and services have fallen off a cliff with huge knock on effects for the industries that produce them. With less disposable income, we cannot be sure that life will return to normal as quickly as it was stopped when the virus started. 

In terms of cotton, the USDA showed a 180k bales net negative sales as many destinations including Vietnam and Pakistan cancelled contracts. There were new sales made but the large unexpected wave of cancellations meant the total figure was a negative. Brazil recaps have started coming back into the market for nearby shipments though finding a buyer has been the hard part. Mils requirements for nearby is all but nonexistent as they prefer to look at further forward shipments.  

As governments print money, inflationary pressure could point to stronger commodity prices, however, the fundamentals of the cotton market remain terribly weak. Factories remain closed weakening demand, yet the production side remains the same, at least in the short term. As inventories continue to build up, traders will be asking themselves where they can find homes for their cotton in the near future. 

The market should continue to react positively to any easing in restrictions of lockdowns, as people get back to work and back buying in shops. However there will be long term implications to this which it is worth paying attention to. We do feel that the bottom was at 48 c/lb a few weeks ago but we don’t see the market heading back to 60 c/lb anytime soon either.