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Reporting Period 18 March – 31 March 2021
Bullish Conditions but Bearish Development
The New York cotton futures dropped significantly during the last two weeks. They lost partly more than 800 points and declined below 79 ct/lb. In the last couple of days, they recovered slightly and stayed marginally above 80 ct/lb. There have not been any comprehensible reasons on the market for such a development. On the contrary, all indicators would have suggested a rather bullish course. During the reporting period, the number of closed contracts on U.S. cotton reached a level that had not been seen for a quite a while. The climate conditions in Texas and Australia were threatening the cotton crop results. Furthermore, the Far East spinning industries increased their cotton demand. All these aspects have pointed to limited availability. Additionally, there are renewed political strains between China, the U.S., and some textile brands about cotton production in Xinjiang, as well as an illustration of the fragile dependencies in logistics due to the Suez Canal accident. Thus, the price development was probably more or less driven by speculation.
The European market was rather calm. The benefits of lower prices were diminished by the strengthening U.S. dollar. The continuous fight against the pandemic in many places as well as the upcoming Easter holidays have tended to shift the focus to a wait-and-see attitude.
Bremen, April 1, 2021