In supply/demand terms, this forecast paints a modestly bullish picture for new crop cotton prices, enough to support Dec07 in the low 60s.The fundamental underpinnings of Dec07 can be further examined by comparing forecasted stocks-to-use at the same point in time (i.e, the preceding July) which were influencing Dec04, Dec05, and Dec06 prices
Those futures contracts were trading in the mid-50s during the preceding July. This highlights to me the influence of non supply/demand forces on cotton futures, e.g, maybe speculative selling on Dec04, and definitely speculative buying on Dec07.
Having said that, upside price volatility is likely given the trend of tightening foreign stocks which could lead to price spikes given the perception of supply problems. There is a lot of focus on the fact that Chinese mills are using up their domestic reserve stocks rather than buying expensive foreign cotton.
Some view this as bullish, thinking that China must come back eventually with strong purchases. However, it is plausible that they are trying to bridge the supply gap between now and September when their new crop supplies start becoming available.
The possibility of a decent Chinese crop and nearby exportable surpluses from India suggests a lot of uncertainty about how much buying they will have to do this fall.
The low level of U.S. planted acreage heightens the focus on U.S. yield potential, as predicted by weather and crop condition.