Source: Mambo

September 14, 2020

Although it was a very up and down week, NYF eventually settled at 64.81, only marginally down from the previous week. The weakness on NYF was linked to the crash on the S&P 500 as well as the Nasdaq on Tuesday and Wednesday.

As we have mentioned previously, NYF are far more sensitive to influences outside of the market and not so concerned with the fundamentals of cotton. It is currently a market dominated by the funds and speculators so Global stock crashes or presidential elections will dictate movements in the market for the time being. 

The US did add 1.35 million jobs in August, however unemployment is still at 8.4%. The Eurozone announced that GDP shrunk by 12% in the second quarter of 2020, the largest contraction since records began. A second wave of the virus is really taking hold in Europe, and with winter approaching we could see further lockdowns in the region. 

A story that has caught the attention this week was the US ban on importing goods made with cotton from Xingjian. The US is enforcing such a ban in order to pressure China into ending the use of forced labour from the Uighur camps in the region. Such a ban would be very hard to police as tracing cotton is notoriously difficult. However, it again points to a worsening relationship between the two countries. 

The WASDE report was of great interest as they cut US production by one million bales, and made some cuts to the Pakistan and Turkish crop sizes too. They are also projecting that global consumption for the coming season will be at 112 million bales, which still feels optimistic. The market initially spiked on this news, but finished unchanged on the session, not hugely surprising seeing as world ending stocks are forecast to be at a massive 104 million bales. 

In terms of demand it is Brazil that continues to be well sold in Pakistan and particularly China. As shown on the USDA sales report, China continues to be a steady buyer of US cotton. Other origins other than US and Brazil are now competing to find homes. Bangladesh reported strong earnings from the readymade garment sector and the same is true in Pakistan. It should not be long before this improved sales filters down to improved demand for cotton….. We shall see 

The market is still trading between 63 c/lb and 66 c/lb. Storm Sally is set to hit New Orleans on Tuesday morning and will then head inland to Georgia. This could keep the markets active until the damage is known to cotton crops, if any. Other than that we will continue to watch the stock markets, the US – China relations and US election news to decipher where NYF could be heading. (Source: Mambo)