The market again lost ground this week to settle at 59.70 c/lb, down 3.65 c/lb in the week.
As mentioned last week, the cotton market looks fundamentally strong while the overriding influence is the stock market’s performance. The corona virus has spread fear throughout the world as schools are closing, conferences cancelled and travel restrictions are put in place. It is possible that the worst is yet to come, and it may be a couple more months before countries can start to effectively contain the spread of the virus, which will see confidence and stability return to the marketplace. Meantime it is likely that markets will be oversold.
Further to the virus, the oil price collapsed this week as Saudi Arabia and Russia entered an oil war with the Saudis slashing the price of a barrel. This only compounded the fears already in the market brought about by the virus.
As quarantines and lock downs start, the question is what effect will this have on consumption. We have already heard that retailers are cutting back on orders and this will no doubt have an effect on destination demand.
For now however, the US continues to sell at a rapid rate, now only needing to sell 50k bales per week to meet the USDA projections. Realistically it looks like US cotton will be sold out in less than 2 months’ time.
For other origins the speed of sales has not been as fast. The demand is there but with such a volatile market it seems mills want to time their purchase right before committing to what could end up being a high priced contract.
Global panic has consumed the markets as all stock exchanges record huge losses, as well as agricultural markets. Simply looking at cotton we try to see where the potential bottom is, we feel that with supply starting to dwindle, the bottom might not be too far off. The question will be on whether the consumption is there to support the market. Very hard to know.
Πηγή: Mambo