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 May WASDE report continued neutral to modestly price weakening in their implication.  This report included month-over-month adjustments to Central Asian Beginning stocks (+450,000 bales) and Production (+770,000 bales) which was somewhat offset by a 990,000 bale increase in Central Asian production.  The other major adjustments include month-over-month adjustments to Chinese imports and domestic use (both higher) which were offset by lower imports and lower domestic use in Pakistan and Vietnam.

The bottom line of the world adjustments was a 230,000 increase in world ending stocks, month-over-month.  Such an adjustment would normally be price neutral according to theory and history.

Updated U.S. cotton supply/demand. USDA’s May WASDE adjustments showed very minor changes with 20,000 fewer bales of 2025 production being balanced out by the Unaccounted category.  With no change in U.S. ending stocks, this has a neutral price implication.

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.