NYF have seen roller coaster action over the last couple of weeks, as December closed at 62.66 c/lb, in the upper end of the trading range of the last couple of months.
The US economy shrunk by 33 % from April to June, the largest drop in GDP since WW2. It is not just the US, but also the UK, German and French economies who have seen their GDP plummet at record levels too. The concern in the US is that the virus cases are climbing, meaning that any economic recovery would be much slower than what might be seen in Europe.
The US and China trade dispute continues to attract attention. It seems to be an endless tussle for power between the two sides as President Trump is now trying to ban many Chinese developed Apps in the US. That aside, China still needs to purchase a huge amount of US agricultural goods to comply with the phase one trade deal. It was positive to see China make a record purchase of US corn (1.76 million mt) in an effort to comply with the deal despite what appears to be a worsening relationship between the two sides.
The most concerning factor depressing the global economy is the virus, flare ups are being seen around the world as the fears of the second spike seem to be well founded. Even in Europe, Vietnam, and Australia lockdowns are being re-introduced. This will continue to have an effect on the cotton market as retail stores remain closed and job fears remain. Shoppers will probably not be back buying cotton garments in the near future.
Activity in the cotton market has remained subdued though improving slightly. Many Asian countries celebrate EID this week which might mean a slower than usual demand scenario. Pakistan has been actively enquiring and buying Brazilian cotton, with also some interest from Vietnam for Brazil. Brazil cotton has suffered a collapse in basis levels and has hence become popular to buyers in many markets. West African cotton on the other hand has maintained a relatively strong basis in comparison and as a result has had difficulty in finding homes.
Looking at the USDA report, it was surprisingly positive after the two previous weeks had shown a negative sales figure. Never in the history of the USDA sales reports had there been two weeks in a row of negative sales. It was mainly Vietnam that was the largest buyer of US cotton. We have to watch the evolution of Hurricane Isaias that is hitting Florida and is set to hit the cotton belt in North Carolina, if so then the market will show strength.
The CCI are still holding close to 1.5 million mt of cotton, however they have sold an estimated 200k mt of this stock over the last couple of weeks, mostly to the domestic market. They have been exploring warehousing options in Vietnam and Bangladesh in order to have their cotton on the doorstep of potential buyers. So far the CCI stocks have not been at a competitive enough level to attract the attention of merchants or mills, however any further price cuts and this cotton could potentially flood the market and further reduce the basis levels of other origins.
As we enter a weather market and the potential for storms in the US we may see a slightly more volatile NYF. The Federal Reserve has announced that they will do whatever required to buoy the US economy and this could mean the continued printing of money entering into global markets. If this is the case then markets will remain strong despite the global stocks of cotton reaching near record levels.
We shall not be doing a weekly market rep
Πηγή: Mambo