The market was weaker over this shortened week to settle at 54.51 c/lb on July, down 261 points. 

Lockdowns continue to be eased around the world but fears are now with the developing world, especially Asia where the virus seems to be spreading faster. Mills in many Asian countries are slowly reopening, all be it at 30 to 40% capacity. This is mainly because it is not safe to have a full workforce on site, but also because of cancelled garment orders and weak demand. 

In India there is zero import business happening, and when mills do open they will have plenty of CCI stock to buy from, even if their price level is currently inflated. The consensus is that the CCI should procure close to 11 million bales, and carry 9 million bales into new crop. They are however a government organization and anything is possible. The CCI have also been advising farmers to reduce their cotton plantings for new crop, though with such a strong price paid this year time shall tell whether the farmers follow. 

With mills closed in India, ginners have been aggressively offering varied grades of cotton at very cheap levels with sales reported into Vietnam. Pakistan has also been in the market for cheap US recaps and other origin lower grades with small lots of business reported. There has also been interest for early 2021 shipments there, principally because cotton acreage is set to fall sharply and be replaced by sugar cane. Reports that the new crop size could be 7 to 8 million bales in Pakistan. 

Brazil recaps are again in plentiful supply, however getting action on them has been difficult with so few markets open. US cotton remains the most liquid, mostly in China where there the reserve has continued to purchase as part of the trade agreement. The reserve could have so far made purchases of close to 200k MT US cotton for June shipments onwards and have again been enquiring for US cotton this week. One should pay attention to the potential conflict again brewing between China and the US as both sides trade blows on the handling of the virus. If it again escalates into the trade war we saw last year then we could see an abrupt end to these reserve purchases, which are rumored to possibly reach 5 million bales. 

Increasingly governments are starting to recognise that economies need to start moving again, especially after many economies are heading to one of the largest recessions seen since the Second World War. The US has now had 33 million people file for unemployment, nearing on 10% of the population. European governments are also supporting the salaries of a huge portion of their populations, unfortunately those living in developing countries do not have this luxury.  

However, as stores slowly open we should see demand return, but the feeling is that this won’t be until at least end of June time. The damage to consumption has been significant, with potentially 2 months of consumption lost, meaning a global consumption figure of under 90 million bales for the year. 

We reiterate that we still feel that NYF prices are being maintained artificially high through the large scale money printing and also the purchases by the Chinese reserve. The reality of our market is perhaps not yet being reflected on NYF.