As we have mentioned above, Chinese imports are alive and well, and at the current pace they will absorb most of the relatively limited unsold supply in origins like the US, Australia, India and Africa before new crop arrives. Even the certified stock, which currently amounts to about 513’000 bales, is not exempt from becoming the target of Chinese buying.

To put this in some perspective, at the pace China has been importing over the last 21 months, namely 2 million bales/month, the certified stock would satisfy just a little over a week of Chinese imports. Of course it’s all a matter of price, but with spot futures flirting with prices in the high 70s, US cotton is starting to look like a bargain to the Chinese, and possibly some other markets around the globe as well.

We therefore believe that prices have relatively little downside from here, maybe another 200 points to 78 cents in July, but sooner or later we expect prices to bounce back by several cents. However, the upside potential looks fairly limited as well, since there is still a lot of grower selling to be done and after having missed the last opportunity, producers will be eager to put on some hedges if December moves back up into the 85-90 cents window.

Plexus Cotton Limited