MAMBO Market Report, 29th June 2021
MAMBO Market Report, 29th June 2021

MAMBO Market Report, 29th June 2021

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The market was again strong over the course of the week with December hitting a yearly high, eventually settling at 87.18 c/lb 

The US economy reported GDP growth of 6.4% in the first quarter, with consumer spending also increasing 11.5 %, both historically high numbers. The World Bank also increased the growth forecast in China to 8.5%, with factory activity also back at pre pandemic levels. China and Vietnam are the only countries in Asia to have achieved a V shape recovery after the pandemic. China and the US being the two largest global economies, it is encouraging that their recovery is now starting to take steam. 

We should not however forget the pandemic and particularly the delta variant. Bangladesh announced a very strict lockdown for the course of this week, the UK alone reported 21k cases of COVID yesterday and Australia is also battling with local outbreaks. The virus will no doubt provide bumps on the road to any speedy recovery. 

As highlighted, the market was strong last week however without any real significant volumes traded on ICE. The market strength came as a surprise to some analysts seeing as good rains continued throughout the majority of the cotton belt in the US, with West Texas expected to receive 5 inches of rain in the coming week. No doubt the strength in the market came from the continued global strong demand but with continued good weather in the US it will be interesting to see if the market maintains that strength this week. 

Demand for cotton continues to be good, particularly in Pakistan who remained active last week despite NYF trending higher. This time last year the question was to who could cotton be sold, as many mills were inactive due to lockdowns. Now the question is not who can you sell to, but how will you deliver it. It has been well documented that container availability and rising shipping costs are becoming a major problem, and no doubt that will continue well into 2022. 

The rumours continue in China as to when or if the State Reserve will step in for imports. It seems clear that China will need foreign cotton to replace the Xingjian production, but at the moment no news has been forthcoming. Any announcement on imports would no doubt be bullish but would also raise the question as to what could be bought. There is really not much on the menu until the US and Brazil crops begin later in the year, and their crops still have uncertainties. 

This week we await the June Acreage report from the US on Wednesday. Much has been reported on the potential loss of cotton acreage to the competing crops of soy and corn, this report will allow us to have a better estimate on that number. Projections for the report vary wildly with some at 10 million acres and others at 12 million. The yields of those acres planted will also be important but a low acreage report could spark the market for a move higher. 

The basis levels of cotton remain strong, helped by good demand and rising shipping costs. Without a huge amount of cotton in the pipeline, we feel the basis should continue to remain strong. The movement of ICE is harder to predict, with unknowns around

Source: Mambo

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