• During the first half of 2022 (H1-22) U.S. cotton prices fundamentally overperformed as the global cotton and textile demand structure between developed and developing nations experienced a regime changing realignment that deemphasized Chinese cotton and yarn.
• The protracted Texas drought can push state cotton production below MY 11/12 low of 3.5 mb which will materially influence MY 22/23 domestic supplies and prices.
• Broad central bank commitment to raise interest rates to contain inflation can amplify headwinds for consumer retail demand during H2-22 and 2023.
• We see favorable supply and demand fundamentals for U.S. cotton which can help support H2-22 and H1-23 prices.

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