NYF were again strong through the week, settling at 65.66 c/lb on Dec, up 85 points. 

The market was well supported as the slow moving Hurricane Sally hovered over cotton growing areas in the US. The majority of the damage from the storm was done in Alabama and Florida with some talks of 200k bales of cotton being lost to the storm. The storm may also affect qualities, meaning less cotton being deliverable under the sales to China. 

Speaking of China, there are increasing tensions between them and the US over Chinese technology companies such as TikTok and Wechat. However, this has done little to affect the phase one trade deal as China bought around 450k bales of US cotton over the course of last week. We are all wondering if China does need the cotton and why they are paying such high prices for US relative to other cottons. As long as these sales continue we expect NYF to remain relatively strong. 

Traders will be watching the negotiations this week between the Democrats and Republicans regarding a coronavirus relief package for American citizens. The republicans have already announced a $14 billion package for farmers and a further relief package will add more liquidity to markets which should keep NYF strong. It has been this constant stream of money and liquidity into markets that have been keeping values high on NYF. 

The other factor keeping NYF values high is the production cuts we are seeing around the globe, most notably in the US which is now forecast to have a 17 million bale crop. This morning a storm appears to have ravaged cotton growing areas in Greece with talks of a 50k MT loss in lint. Pakistan has also been ravaged by poor weather and locusts with local estimates putting the crop at 7 million local bales. West Africa, and in particular Mali should see a much lower crop size for the new season, however this is yet to be forecast in the WASDE figures. It is only India that is maintaining a strong production forecast as the monsoon has been beneficial to cotton growing areas and they should be able to achieve a third picking, with most local estimates having the crop at 36 to 37 million local bales. 

In the cash market buyers were mostly on the side lines with the stronger NYF. Pakistan mills are realising that their crop will not be as large as forecast and were in the market for longer staple West African with some sales concluded. It is clear that any offered prices in the 70’s are not attractive to mills who for a top grade have their sights on prices in the mid 60’s, regardless of movements in NYF. 

With the WASDE cutting US production and therefore reducing ending stocks slightly it seems that a slightly bullish sentiment has returned, despite the lack of demand. Whether the market can reach the 70’s level in the short term remains to be seen. There are plenty of stories that could halt the market move up. The virus in Europe continues to worsen with a new national lockdown being considered in the UK. China and US tensions appear to be deteriorating, though it has appeared this way for some time. The earning reports from eight S&P 500 companies shall be released this week, with investors keen to see just how badly the virus has curtailed business.