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.  The old crop 2026/27 balance sheet is found in the right-hand-side column:

Updated World cotton supply/demand.  USDA’s month-over-month world adjustments in the August WASDE report were bullish.  On the supply side, world beginning stocks were cut 920,000 bales, mostly in India (-400,000), China (-300,000) and Brazil (-200,000 bales). In contrast, world production was raised 370,000 bales, mostly in Brazil (+950,000 bales), Central Asia (+80,000), the EU (+50,000), Turkey (+50,000), and West Africa (+30,000), and slightly offset by a 90,000 bale cut in the U.S.  World imports rose 460,000 bales month over month, mostly in India (+500,000), Vietnam (+200,000), and Indonesia (+100,000), and partially offset but cuts in the EU (-200,000) and Bangladesh (-200,000).  On the demand side, world domestic use was raised 970,000 bales, mostly in India (+500,000), China (+500,000), Vietnam (+200,000 bales), and Indonesia (+100,000), and offset by cuts in Bangladesh (-200,000) and the EU (-20,000), all compared to July.  Lastly, world exports were raised 480,000 bales, month over month, mostly in Brazil (+300,000), Central Asia (+100,000), the EU (+50,000) and West Africa (+30,000).  The bottom line of all these adjustments was a 1.53 million bale reduction in  world ending stocks.  Such an adjustment would normally be price supporting according to theory and history.

Updated U.S. cotton supply/demand. USDA’s August WASDE adjustments reflected 90,000 fewer bales produced, compared to July.  This decrease was mainly due to a 74 pound reduction in yield per harvested acre, and despite an increase in both planted (+620,000) and harvested (+650,000) acres.  With no changes to the demand variables, and minor tinkering with the Unaccounted variable, the 90,000 decrease in production translated to a 100,000 bale reduction in ending stocks, which by the numbers would be a price supporting adjustment. 

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.