Bullish and bearish factors currently compete at cotton market. Major bearish factors include global shortage of product consumption, bullish ones – non-favourable weather conditions in the USA and India, which may pose a threat to the yield capacity of cotton in these countries. Shortage of global consumption that results from European debt crisis outweighs the weather factor, but at the same time bears a suspended effect, as this factor is hard to measure.
At the same time the weather factor bears a quicker effect, which is represented by creeping saw-type uptrend. Another bearish factor concerns the rise of cotton production in China during this season. This is hard to notice, but it may have catastrophic consequences for global prices. China is the major importer of cotton, and the USA is its main supplier. The recent situation is such that cotton prices at Chinese domestic market are higher than prices worldwide. This stipulates large manufacturers to buy the product from abroad. It prices become equal because of higher production, this may make the crisis of overproduction worse.
One way or another, despite the short-term bullish factors, the general fundamental trend at cotton market remains bearish. It is most likely that during the season of 2013-2014 my production areas of cotton will greatly reduce in favour of grain crops.
Technically, the market shows a rising saw-type trend, and the price is traded above the 50-day average. According to the Analytics Team of Commodity Trading Department of , it will return to the 50-day average, after which uptrend will remain for some more time. However, the potential of such trend is limited due to the abovementioned factors. It is most likely that we are currently facing a correctional phase of global downtrend.
