We had felt that this spike on NYF was around the corner and it delivered on Thursday as we saw historic volume traded on ICE and a nearly limit move up. The market eventually finished at 82.74 c/lb, up 210 points in the week. 

This meteoric rise was the perfect storm of a strong ZCE, positive developments surrounding further stimulus in the US, another strong US sales report, a tightening US balance sheet and a fast approaching first notice day on Mar 21. This all boiled over to an exponential rise in prices further fueled by specs coming in on the long side as we pushed through resistance levels. 

The US announced disappointing jobs figures on Friday as only 49k jobs were added in January and the country remains about 10 million jobs short of where it was back in February 2020 at the beginning of the pandemic. 

This picture is true of most western economies where the V like recovery is yet to take shape and there will be stutters as we make slowly come out of the pandemic. At the same time, such disappointing jobs numbers in the US will only force lawmakers to quickly push through the large stimulus package and money printing programs which will continue to fuel the surge we are seeing on stock and commodities markets. 

In Pakistan cotton production is now reported to be at close to 5.5 million bales (170kg bales), a two-decade low for the country. The textile sector is however back at full capacity and expected to import around 5 million bales for the season to bridge the gap. Anecdotally it is said that mills are pushing the government to allow Indian cotton into the country as it is now by far the cheapest cotton in the world. 

The Indian CCI did sell around 250k bales to local mills on Friday of last week after the rise in NYF, though their stocks are still at 10 million bales. However, Indian cotton moving to Pakistan seems like a move that politically either country is ready to push. 

Indian farmers continue to protest around Delhi in what is now becoming a crisis for Prime Minister Modi. The government has imposed a new 10% tax on cotton imports, effectively meaning that local prices and farmers will be well supported for the rest of the season. At the same time the government has repealed the farm laws they enacted and stated that MSP programs will continue. Despite all of this, the protests go on with no end in sight. 

On the cash business it has certainly been quieter though it was a surprise to see China so active on the US export report. Particularly when we consider that surely a large portion of the sales to China have to be tenderable higher grades. The recent classing report out of the US had only 50% tenderable bales classed. That aside, Bangladesh is looking for afloat cotton, Pakistan is looking for lower grade cotton, and on the eve of Chinese New Year many other markets remain subdued. 

The overall sentiment remains bullish among most analysts. We feel we are entering a period of two markets where the cash business may remain quiet though NYF is likely to be volatile as we enter the expiration of the March contract. There may be hurdles on the way however a move up into the high 80’s seems perfectly justifiable. 

It is the year of the Ox and we wish everybody a prosperous and happy Chinese New Year. May the Ox help carry us all through this pandemic.