The NYF saw continued strength again over the week as Dec settled at 64.31 c/lb, up 136 points in the week.
The continued fallout from the virus is no more apparent than in the retail sector where more well-known companies continue to go into administration or see huge cut jobs. Brooks Brothers, Victoria’s Secret and TM Lewin are some of the most recent companies to announce administration procedures and there will no doubt be more. Consumers are now slowly returning to the shops but with vastly different requirements and with less disposable income. We do not believe it will be a rapid recovery for the sector.
The WASDE was released on Friday. The US has had production reduced to 17.5 million bales for new crop as acreage planted has been reduced due to drought fears in Texas. This has in turn reduced US ending stocks. The WASDE did not however cut global consumption which did come as a surprise as we feel demand continues to be very poor.
This lower US crop makes the cotton market more interesting. China continues to buy US cotton as per the terms of the Phase one trade deal, and with a reduction in the US production ICE could continue to see strength. As we know, NYF are a function of the supply and demand of US cotton, so whilst the US market gets tighter prices should in theory remain relatively strong. However, this is not true for other origin cottons that are now fighting to find homes even through reducing prices drastically.
Again it has been a tough week to find homes for cotton. Pakistan has shown some interest in some cheap Brazilian recaps as too have Vietnam, but difficult to close business. Bangladesh is focusing on opening LC’s for old contracts though it appears this is moving very slowly. All buyers are complaining about the state of the yarn market, where prices seem to be falling despite the rise in NYF. China’s absence from the yarn market is also of concern.
The cotton market is now looking at record level of supplies outside of China, with a huge amount of cotton coming onto the market soon. In fact, everywhere we look there are stocks to find homes. The CCI in India has 2 million MT with a 35 million bale crop coming later in the year. Brazil has 2 million mt for export also arriving soon whilst not yet having sold all of their old crop. East and West Africa have large quantities of cotton either on the water or at the ports. There is a glut of cotton without the buyers willing to take it in just yet.
The above should fundamentally point to a weaker market but it is not as simple as that. ICE will react to the state of US cotton which is being reduced in size and is the only cotton that is able to sell in good volumes to China. As long as that continues, these higher prevailing prices should continue.
Πηγή: Mambo