The market cooled down this week as the EID holidays commenced, with July closing at 58.06 c/lb up 21 points in the week.
Aside from the very obvious and sad human cost of the virus, the cost to economies and businesses globally is starting to become apparent. In the UK Primark reported a drop of £675 million in sales in the month of April, with retail sales down 20% in the UK for April, the largest drop since records began. In the US 2.4 million more Americans filed unemployment claims last week, bringing the 9 week total to 39 million. The picture from a macroeconomic perspective looks very poor and should have a knock on effect on the cotton market.
The question will be how quickly economies can recover from lockdowns with consumers back in shops and spending money. We believe consumer attitudes will be changing in the months and years to come, globalization has led to hugely complex and environmentally unfriendly supply chains with a large focus on China. President Trump has been touting more localized supply chains for many years, one that is not so reliant on China, and this is how the world might position itself when the dust settles.
The physical picture continues to see India and US being the most active sellers, although the sales of US to China have tapered off over this week. Indian good grades from local ginners continue to be offered at very aggressive prices, landing in the Far East at even ICE for reasonable qualities. We are seeing a touch more enquiry from Pakistan and Bangladesh as mills their slowly increase their capacities, turning that enquiry into business is the hard part.
As the market has moved upwards suppliers in both East and West Africa have been trying to sell stocks to achieve a more reasonable flat price. We have seen that prices asked for by sellers and what the market is willing to pay remain a long way apart. There remains a large price difference between Indian cotton and other origin cottons. Private ginners in India should run out of cotton in about one months’ time. At this point the CCI will have to decide whether they maintain the strong price they are currently asking for or lower the price in order to make sales.
With lockdowns continuing to ease globally and huge efforts being made on a vaccine, the global stock markets and oil have been trending higher. Cotton we feel is close to reaching its peak and feel that downside pressure will come as growing stocks weigh on prices.
Πηγή: Mambo