NYF retreated over the course of the week to settle at 68.92 c/lb, down 237 points in the week. 

Rising cases of COVID-19 across Europe forced governments to take action. France, Germany and the UK imposed national lockdowns, whilst Italy does not appear to be too far behind. Widespread lockdowns will stifle demand as people stay home and shops remain closed. 

These lockdown announcements have shaken global markets. The oil price has fallen by 5%, currently trading at $35 per barrel. Likewise the Dow Jones and the S&P saw similar falls as investors became nervous over the state of global economies that are confined. 

Attention this week will turn to the US election which will no doubt be closely contested, despite the polls suggesting otherwise. There is so much uncertainty regarding the result. Will the results be accepted by the losing party, how will the result affect the stimulus package that is currently being negotiated, and how will the elected president tackle issues such as global trade particularly with China. There are a huge amount of if’s and buts regarding the elections and investors will no doubt take a neutral approach heading into results day. We should also not take our eye of the US dollar that has strengthened over the week significantly. 

In terms of the cotton market, we saw another good week of US sales, with Pakistan and China purchasing the largest quantities, shipments also remained excellent. Again though a deluge of rain has fallen over the course of the week in the Southern states of the US. Alabama, Tennessee and Missouri were only at 50% harvested so this rain has not been welcome at all. Anecdotally there are estimates for the US production at 15.8 million bales, but it seems unlikely that such a low figure would be reported in the WASDE of November. 

China has been in the market again this week looking for cotton that can arrive in China before the end of February, West African and Brazilian have been the most desired. Likewise we have seen good demand from Pakistan and Bangladesh for a variety of cottons. Basis levels continue to remain firm at origins and are perhaps strengthening, on the back of some good demand over the month of October. With the drop in NYF it seems mills have taken a back seat and prefer to wait for a less volatile market before returning, whilst perhaps using this opportunity to fix their on call contracts. 

The index funds have built up a steady long position over the course of the last six months, however we shall see whether this continues faced with such global uncertainty. They will either roll their longs into the March contract or decide to take their profits and get out, the latter should see a further fall in NYF values. 

The market has changed drastically over the course of the week and more of a bearish sentiment is taking over, it therefore becomes even harder to predict the movements on NYF going forward. If a winner is announced in the US elections then this should be stable for all markets, however a long drawn out battle over the results will prove volatile for global markets. With COVID cases hitting 100k in one day in the US on Sunday, attention will again turn to a stimulus package in the US which should give a more positive tone to our market. However, with more and more countries going into lockdown, it is hard to see a clear scenario going forward.