The December contract saw some strength over the course of the week closing at 62.95 c/lb, up 345 points in the week. 

2020 was supposed to be the year of the Olympics in Japan with the slogan ‘faster, higher, stronger.’ Sadly the opposite has been true on the cotton market this year which has been ‘slower, lower and weaker’ 

The US jobs report announced that unemployment had reduced by 4.8 million jobs in the month of June, although this is a positive, the US economy is still down 14.7 million jobs since February. Tensions also flared between China and the US over the issue of Hong Kong. If this situation sours further it could spill over and affect the phase one trade deal. 

In the cotton market the biggest news of the week was the acreage report out of the US. The new estimate for cotton planted acreage was 12.2 million acres, down 11% from last year. This should put the US crop at roughly 18 million bales for the coming season. This latest report caught the attention of speculators who immediately pushed the December contract out of its slumber taking it to a 4 month high of 63.12 c/lb. 

The USDA report was also in line with expectations, again with China and Vietnam taking the large percentage of the 320k bales sold across both marketing years. It is again the US that dominates sales as other growths struggle to find homes around the world, but the continued steady sales of US cotton is certainly adding support to the cotton market. 

Demand for other origins remains very poor, and those mills that are enquiring are looking for cheaper priced cottons, which will now be harder to secure with NYF heading higher. Vietnam and Pakistan have been purchasing cheap Brazil recaps and Indian cotton from local ginners is finding some homes in Bangladesh at very competitive levels. 

West African cotton remains the most expensive basis cotton in the world, with a higher NYF we can expect that basis to weaken over time. There were also tenders from Mali, Ivory Coast and Togo last week for current crop but with very few sales being reported as suppliers prices ideas do not match those of the merchants. 

The move up in the market has further exacerbated buyers as their yarn stocks build and the prices of yarn fall. There is a growing gap between what merchants quote and what buyers are willing to pay, and there are not many willing buyers in any case. World ending stocks are at all-time highs, the CCI has two million mt for sale and the Brazil crop will also be arriving soon. Even if fundamentally the market looks weak, speculators started to enter the market on the long side. We are set up technically for a higher NYF. The market has therefore become very hard to predict and we remain relatively neutral as to what the future could be.