In what was a very up and down week on NYF, the market eventually settled down 14 points at 81.56 c/lb. 

Despite the continued bull sentiment in cotton, the spreading pandemic seems to have been widely disregarded as hedge funds and speculators continue to bet on cotton and commodities in general. That said, the new variants of Covid from South Africa, Brazil and the UK are certainly more transmissible and possibly more deadly, which should sound some alarm bells. 

It was announced this week that China had bought only three fifths of the required purchases of US AG products under the phase one trade deal. The Biden administration will have to decide whether to continue or not with the hard line approach on China which has proved popular. 

Staying with China, it was announced last week that 350k mt of cotton had been imported in December, which was 133% higher than the same period last year. This is perhaps down to cheaper imported cotton relative to local prices and also due to the US ban on cotton products from XinjIang entering the US. 

US export sales continue at a very good pace to a variety of markets. At the current rate of sales the US will effectively be sold out of cotton in around one months’ time, which certainly lends to a continued bull run on cotton. 

Bangladesh was in the market over the week with good quantities of Indian and WAF being sold there. Yarn prices have improved in Bangladesh although the prices they are willing to pay for WAF are not quite at the level the merchant is requiring based on tender results at origin. With Indian selling at around four to five c/lb cheaper than the WAF it is understandable that the mills might take the cheaper option and in turn put pressure on the basis of competing growths. 

Last year India exported a total of 3 million bales, and they have already achieved this level this season. With the MSP now below the market level the CCI will slow down their purchases slightly and in turn arrivals should also slow. However with good demand for Indian locally and abroad there is no price pressure on Indian cotton and we could perhaps see that basis improve over the next few weeks as market forces play a part. 

As mentioned in last week’s report, the continued government support programs are fueling inflation fears which are driving commodity prices to record highs. World economies are heading into deep recessions but this cheap and limitless money creation is essentially creating huge bubbles with no end in sight. 

The FED will also hold their first meeting of the year this week with Janet Yellen already indicating that the dollar’s value should be determined by market forces. With overwhelming possibility of inflation we foresee that the dollar should continue to weaken, in turn stimulating larger sales of commodities. 

The MAR 21 contract hit 83 c/lb last week, a 12 month high and as pointed out above there are some factors that are suggesting we could continue higher. China and their continued imports, a small US crop and large weekly sales, the endless printing of money and a scarily large on call unfixed positions. We mentioned the holy grail of $1/lb last week and maintain that this could still be achievable.