How to start this cotton market report without a thought for Billie Dunavant who passed away at the end of last week. He was one of the greats of our trade, who had become the Oracle due to the accuracy of his analysis on the cotton market. Rest in Peace Sir.
The other important information from the weekend was the WASDE report published on Friday evening with its share of more or less expected surprises. The first one concerns the US production which is revised upwards (18.5 million bales) which in turn has led to an increase in exports and ending stocks. It is difficult to imagine an increase in US exports when we look at the catastrophe that is the shipping industry.
Without going into a litany of figures, we can summarize the situation by predicting that if the USDA forecasts are correct:
- There will be no shortage of cotton this year
- The NYC futures market should move from "invert" to "carry" if the freight situation does not change
- The basis achieved should ease a touch to a more traditional range
However, what is going to happen to the freight market where for the first time we are witnessing a crack in the united front shown by the ship-owners. CMA-CGM has announced that there will be no increases to their freight rates for the next five months. If this decision brings in its wake a reaction from the other major shipping lines, then we may have seen the top of the price range for containers.
On the demand side, we remain of the opinion that it is still overvalued, and the post-COVID catch-up will not last long, particularly if the tension on the freight rate market eases.
The clear recovery of the US economy continues to push the dollar against all currencies.
Supply and demand for all commodities seems likely to rebalance and lead to at least a stabilisation of prices and greater fluidity in trade. Cotton will be part of this.
Source: Mambo