As predicted, it was a choppy week in the cotton market with December finishing at 68.62 c/lb, down 30 points in the week.
Former Vice President Joe Biden was voted in as President in the US. Attention now turns to the key battle over the senate seats, and who will eventually take control of the senate. A Republican controlled senate would block much of the policy that the new President wants to push through, and the new round of senate elections in January shall allow us understand the future direction of US policy.
For the cotton market it will be interesting to see how the new administration deals with China and whether they will take as tough a stance as previously. Ultimately, the former policy on China was mostly popular and might force the new president to maintain a similar stance.
We cannot forget either the course of the Coronavirus which has now reached 1.5 million deaths globally and brought about new lockdowns throughout Europe and the consequential affects this has had on economies around the world.
The USDA sales were disappointing over the course of the week only totaling 115k bales for the current season, with China and Pakistan being the main buyers. There were also around 117k cancellations which is concerning. Attention will now turn to the WASDE report out on Friday. We continue to hear concern over the US crop which we understand could be as low as 16 million bales and perhaps less. However, it seems unlikely that the WASDE will report such a low figure for now.
Mills mostly took a back seat last week as they waited for the election results. That said, there was some business reported in Pakistan and Bangladesh for Brazilian and also West African cotton. The saying that small crops get smaller is proving to be true in Pakistan. Anecdotally we hear that the crop could be as low as 5.5 million bales. Pakistan’s market requires 14 million local bales per annum which means they will need 8 million bales for import, of which we believe about 3 million bales has already been booked up until January 2021. We can therefore expect their import requirements to continue well into 2021.
Fundamentally, crops globally are continuing to get smaller, principally China, the US, Pakistan and West Africa. This has then also been coupled with better than expected demand from a variety of markets but mostly Pakistan and China. Therefore from a fundamental picture we feel that the market should maintain current levels. However the global picture appears to be far less certain. The coronavirus pandemic continues to hammer economies and lockdowns could slow demand in the cotton market. The picture in the US is also uncertain but becoming more clear as we move forward.
Πηγή: Mambo