The market was down 1.95 c/lb this week with July closing at 59.84 c/lb.
Fears over a second wave of the virus in the US as well as continued rising cases in South Asia have prompted a more risk off attitude to the market and hence the weakness. Europe is continuing to ease lockdown restrictions whereas many other continents continue to be affected by the virus including South America, North America and much of Asia.
The USDA sales report was overwhelmingly positive and quite a surprise. It appeared from the outside that little activity had happened on the US over the week, but between China and Vietnam they bought nearly 600k bales covering the two crop years. Shipments were also in line with what is required to reach the 15 million bale target.
The WASDE report lowered consumption for the current season to 103 million bales. Before the pandemic this was forecast at 118 million bales, which gives an idea of how badly the virus has affected our industry. Due to this weakening consumption picture ROW ending stocks are also set to rise massively, now estimated at 63 million bales for the current season.
The basis price for Indian has increased over the week as the good grades from local ginners get tighter. There was also news yesterday that the CCI has reduced pricing on their stock levels, especially the old stock that they have in warehouse. So far they are offering up just 50k bales of 10 million bales stock that they currently hold. If they do manage to make sales then we might expect to see the basis on competing origins drop even further.
Some local estimates are now putting the Pakistan crop at 7 million bales for the coming season due to poor seed, low germination and the continued locust threat. Demand in Pakistan has remained relatively stagnated as they look for cheap cottons much lower than 60 c/lb.
Elsewhere on demand, China has clearly been buying US but also some Brazil at cheap basis levels. Turkey has also been buying US recaps and argentine cotton. With the basis for Indian cotton from local ginners getting firmer less of this business has been reported in Bangladesh, who continue to remain quiet on the import front.
With the CCI now entering into the market, continued weak demand and an ever increasing ending stocks picture it is hard to see a scenario where NYF remains heads back into the 60’s.
Πηγή: Mambo