The market steadied over the course of the week to settle at 63.35 c/lb, up 85 points.
The coronavirus still remains as the focus for the market. Governments worldwide continue to put support measures in place to stop the spread, as well as economic measures to limit the impact on global supply chains. Consequently the cotton market is reacting to the DOW in particular rather than its own fundamentals.
Aside from this, fundamentally cotton continues to look relatively strong. The USDA reported an excellent pace of sales and shipments. The US now only needs to sell 75k bales per week to meet their export figure target and will likely be sold out in the next couple of months. This should lend support to other growths.
In India the CCI has been selling their old crop stocks, it is thought they should sell out the remaining 100k bales in the next couple of weeks. Arrivals in India remain strong however the quality continues to deteriorate.
This supports our summary over the last few weeks with regard to quality availability. Soon there could be a lack of good quality cotton in the supply chain. The US and Brazil will soon be sold out of top quality stock. The CCI have taken all the high grades in India, whilst Australia has very little. It could be left to West and East Africa to supply mills with higher grades.
It seems that mills in Vietnam, Pakistan, Bangladesh and India took advantage last week of the fall in New York to purchase some cheap flat price cotton. This week New York has been higher and so again mills are waiting for another dip.
The Coronavirus phenomenon may create a diverse market, whereby global stock markets remain under pressure, but strong fundamentals in the cotton market could lead to greater stability.
Source: Mambo