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 adjustments in the August WASDE report reflected much tighter adjustments to the 2025/26 world cotton balance sheet.  Supply side adjustments included 1.73 million fewer bales of beginning stocks, mainly in Brazil, China, and the U.S., compared to July.  World production was lowered 1.8 million bales, month over month, 77% of which was in the U.S. (see discussion below). World imports were 1.1 million bales fewer, compared to the previous month. Altogether the world supply was reduced 4.63 million bales, which is a large adjustment. On the demand side, world consumption was trimmed only 130,000 bales compared to July, mostly in Turkey and India (offset by an increase in China). World exports were cut 1.1 million bales to match the cut in world imports. The supply side cuts dominated those on the demand side, so the bottom line was an historically large 3.41 million bale cut in world ending stocks, month over month.  Such an adjustment would normally be price supportive according to theory and history.

Updated U.S. cotton supply/demand.  USDA’s August WASDE report included very bullish supply side adjustments to the U.S. new crop balance sheet, compared to the previous month’s numbers.  To begin with, U.S. beginning stocks were cut 100,000 bales, month over month.  The combination of lowering U.S. planted acreage (-840,000 acres) and raising abandonment (+3.5%) combined to cut harvested acres by 1.3 million.  Even with an increase in yield (+53 lbs per harvested acre), resulting U.S. production was reduced 1.4 million bales to 13.21 million bales.  On the demand side, U.S. exports were cut a half million bales to account for the reduced supply.  The bottom line of this was a one million bale reduction in U.S. ending stocks to 3.6 million, which is an historically bullish adjustment as well as a price supporting 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.