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 December WASDE report were mostly offsetting.  Supply side adjustments included 120,000 more bales of beginning stocks compared to November, mostly in Brazil.  This supply adjustment was more than offset by a 290,000 bale decrease in world production month over month, with cuts in the West Africa (-400,000) and the EU (-50,000) outweighing a 150,000 bale increase in the U.S.  World imports were 280,000 bales fewer compared to November, mostly in Bangladesh (-100,000) and Vietnam (-100,000).  On the demand side, world exports was cut 260,000 bales compared to November, mostly in West Africa (-270,000) and the EU (-30,000). World consumption was reduced by 270,000 bales compared to November, mostly in Brazil (-100,000) and the U.S. (-100,000). The net effect of all this tinkering was a 40,000 bale increase in world ending stocks compared to November.  Such an adjustment would normally be neutral bearish according to theory and history.

Updated U.S. cotton supply/demand. USDA’s December WASDE adjustments combined several moderately bearish adjustments. U.S. beginning stocks were unchanged, but the increase in average yield per harvested acre resulted in the  150,000 bale increase in U.S. production.  On the demand side, U.S. exports were unchanged from last month, but domestic consumption was cut 100,000 bales. The bottom line of all this was a 200,000 increase in U.S. ending stocks, which is a modestly bearish adjustment and a price neutral year over year level level.

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.