The virus, small in nature yet catastrophic in impact. So, the metaphor has been seen again this week as the ‘Evergiven,’ small in nature, has managed to block the Suez Canal and therefore halt the fluidity of international trade, as did the virus. 

Freight transport has already been incredibly difficult this year and could have done without this extra complication. The price of freight, already high, should continue to rise in the coming months, whether in conventional or container transport. 

The virus reminds us of the vagaries of life. The world has become so globalized and so precious that a virus size of a grain of sand can cause such economic and health disasters. After the 2008 crisis, the banks, which were singled out at the time, had to undergo ‘stress tests’ and tougher regulations. There is a good chance that stress tests in some form will be carried out across the world after this event to make sure such a pandemic cannot occur again. 

On the cotton market we again saw a volatile period. But it is still difficult to know the origin of this volatility as the fundamental factors seem to be stable. The one cotton related announcement this week will be Wednesday’s USDA report where the first estimates on acreage and stock levels for new crop commodities in the US will be reported. 

• There was another excellent report of US cotton sales last week. In a generally gloomy climate, the US crop should soon be sold out, leaving the question as to how mills shall fill the gap between the old and new crop. 
• Weather conditions and concerns for the various crops remain unchanged. 
• Cotton competing crops are more profitable which should in turn put pressure on cotton acreage. 

But market fears continue to persist: 

• The symptomatic exit of investment funds from agricultural commodity markets, such as sugar. 
• The new trade war that America is looking to wage against China. Despite the agreement reached with the previous administration, hostilities between the two countries have once again resumed. However, China, invigorated by a swift recovery from the pandemic and strong growth forecasts for 2021 is determined not to lose ground. 
• The very significant strengthening of the US dollar is undoubtedly weighing on prices and this trend looks set to continue, at least until Europe finds a solution to the vaccine shortage that is undermining any idea of a recovery. 

One fact that also adds to the bearish sentiment is the crisis over the future of Xinjiang cotton, with most major textile groups (Inditex, H&M, GAP, Nike, Adidas, to name but a few) looking to ban it from their supply chains. China is accused of using forced Uighur labour in the cotton fields of Xinjiang, and the question remains as to what will happen to the five million tons produced in this region (80% of Chinese production). Beijing has accused Western manufacturers of ‘eating the rice whilst breaking the bowl’ and calling for a boycott of the international brands involved. 

For its part, the Better Cotton Initiative (BCI), which certifies sustainable development in the cotton industry, said it had not seen any traces of forced labour in the region. Could this statement, from a recognised institution of which all the major groups involved are members, serve to clear the way for these groups to continue their activities. Caught between a rock and a hard place, the ‘boycotton’ seems unlikely to take place as the Chinese Market is too valuable to the brands. 

In one month, the market has lost nearly 20% in prices without really being able to determine the exact cause. But not so long ago we wondered why the same market continued to rise when consumption was at its lowest. 

However, we may not have to wait too long, as the market has the ability and apparently the will to rebound in the coming weeks.