March continues to be strong as it settled at 73.24 c/lb on Friday up 28 points in the week. 

The market has found strength over the last month on the announcements of three Vaccines and the hope that they will start to be rolled out at the beginning of 2021. That aside, the spread of the virus is continuing aggressively through the US and the need for a stimulus package is now becoming more relevant than ever. The first stimulus package passed expires on 26th December which will leave many Americans without income unless a second stimulus package is passed soon. 

We should not take our eye off the weakness in the USD either. Since the announcements of vaccines, global stocks have rallied and the dollar has lost its ‘safe haven’ charm as investors are more confident to widen their portfolio away from the USD. This also has on effect on the cotton market as importers of cotton are paying a higher price in local currency. Consumers are stuck with higher prices on NYF as well as higher currency costs, which has translated into weaker demand. 

In India arrivals have been strong, up around 10% year on year as the crop is much earlier. So far the CCI have bought around 300k bales of new crop, taking their overall stock level to around 4.5 million bales. They are however making daily sales to local industry at the same time as buying new crop. There have been reports of pest attacks in Maharashtra and Gujarat with local estimates now putting the crop there at around 35 to 36 million bales, down from the 37 predicted earlier in the year. The CAI are reporting on their predicted crop size later in the week, which will be something to watch. 

Protests occurred in India over the weekend as thousands of farmers descended on Delhi to protest the new farm legislation in Punjab and Haryana. Essentially the government is allowing private investment in agriculture whilst also not guaranteeing price to the farmers for their produce. The fear is that the new laws would allow exploitation of farmers by private traders. The laws have not been rolled out across India and the CCI will obviously continue to buy cotton however it may have consequences for the CCI if the laws are adopted country wide. 

In Pakistan activity has slowed over the month of November as lockdowns in Europe and the US has made mills take a backward step. Retailers have been asking for delays in the deliveries of garments, but we are not seeing the large wave of cancellations we saw during the first quarter. We feel that Pakistan still needs around 500k mt to cover their import requirements between now and new crop. With the situation starting to ease and shops opening, perhaps December might see better demand from Pakistan. 

It was Vietnam that lead the way on the USDA sales last week as sales overall were very strong in a quiet market, with Bangladesh also showing strong purchases. The country has been particularly quiet over the last few months which has been evident in their import figures. They imported 350k bales in August and 500k bales in September, a long way off the 600k bales required monthly if they are to meet the estimated WASDE import figure. 

From a demand point of view we appear to have stalled as mills know that there is plenty of cotton in the system and perhaps don’t want to chase purchases with ICE at highs for 2020. However cotton and Ags in general are finding outside support from Index funds as they continue to bet on higher prices and increase their long positions. So while a move to the mid to high 70’s is not out of the question, demand and basis will perhaps not follow.