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 July WASDE report reflected modestly bearish adjustments to the 2025/26 world cotton balance sheet.  The supply side variables saw lower beginning stocks, higher production, and stable imports, month over month. World consumption was raised 360,000 bales compared to June, mostly in Pakistan.  The bottom line of this tinkering was a modest half million bale increase in world ending stocks.

Updated U.S. cotton supply/demand.  USDA’s June WASDE report included extremely bullish supply side adjustments to the U.S. new crop balance sheet, compared to the previous month’s numbers. As a result, carryover declined from 5.2 million bales to only 4.4 million bales.  This was very bullish in the adjustment and the resulting modest level of carryover stocks, with an historically bullish interpretation.  In contrast, raising planted acreage (from June 30’s Acreage report) to 10.12 million acres, and tinkering with regional abandonment, the July WASDE raised projected supply by 300,000 bales.  With no changes on the demand side, this had the effect of raising ending stocks  from 4.3 million bales to 4.6 million bales.  While still at a neutral level year over year, this takes the edge off the possibility of an early July short covering rally.

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.