Fundamental analysis involves comparing major supply and demand variables like production, consumption, and ending stocks.  This is usually based on organized tables, the prime example of which are published by USDA, and reproduced below:

Updated World cotton supply/demand.  USDA’s month-over-month world adjustments in the January WASDE report were modestly price supportive.  Supply side adjustments included 850,000 fewer bales of beginning stocks compared to December, mostly in India.  This cut was reinforced by 360,000 fewer bales of world production, mostly in India (-500,000), the U.S. (-350,000), and Turkey (-200,000), all of which was partially offset by a million bale increase in Chinese production, month over month.  World imports were 40,000 bales higher compared to December.  On the demand side, world exports was 30,000 bales higher compared to December, mostly in India (100,000) and partially offset with small cuts elsewhere. World consumption was raised 310,000 bales compared to December, mostly in China (500,000) less a 100,000 cut in Turkey. The net effect of all this tightening was a 1.49 million bale increase in world ending stocks compared to December.  Such an adjustment would normally be price supportive according to theory and history.

Updated U.S. cotton supply/demand. USDA’s January WASDE adjustments combined several moderately bullish supply adjustments. U.S. beginning stocks were unchanged.  U.S. planted acreage was slightly decreased by 20,000 acres.  But U.S. abandonment was decreased such that harvested acres actually increased by 430,000 acres, month over month.  Lastly, average yield per harvested acre declined month over month by 73 lbs.  All of this has the appearance of more lower yielding dryland being harvested than was previously expected.  The resulting supply side change was a 350,000 bale cut in U.S. production compared to the December forecast.  Nothing was changed on the demand side, so the ultimate bottom line was a 300,000 decrease in U.S. ending stocks.  This is a modestly bullish monthly adjustment and a price neutral resulting level, year over year.

Fundamental analysis is fairly straightforward in its application.  However, there are a lot of moving parts and uncertainty in balancing supply and demand variables.  The price outlook can also be influenced by non-fundamental factors, particularly in the short run.