All you need to know about cotton this week

Stern action against dollar speculators sharply decreased dollar rates in the open market in Pakistan. This in turn resulted in a sharp decline in cotton rates as well. The rates were already under pressure due to the bearish trend in the New York Cotton market.

Karachi Cotton Association (KCA) on Thursday decreased the spot rate by Rs 700 per maund and closed it at Rs 18,500 per maund. Despite the decrease in cotton rates, the spinners refrained from buying resulting in very low trading volumes.

Cotton rates are being adjusted daily in line with the dollar’s adjustment against the Pakistani.

Spinners are waiting for the final rate at which the dollar would settle against the rupee.

In line with the new reality, the rate of new cotton crops in Sindh declined to fluctuate in the range of Rs 17,000 to Rs 17,500 per maund. The rate of Phutti in Sindh also declined sharply and it is being traded between Rs 7,500 to Rs 8,000 per 40 kg.

The decline in the rate of cotton in Punjab was not as sharp as in Sindh. Still, the prices declined to range between Rs 18,500 to Rs 18,700 per maund while the rate of Phutti in Punjab was the same as in Sindh as Phutti was being disposed between Rs 7,500 to Rs 8,000 per 40 kg. The rate of cotton in Balochistan was quoted between Rs 17,500 to Rs 18,000 per maund while the rate of Phutti ranged between Rs 8,000 to Rs 9,000 per 40 kg.

800 bales of Sui gas were sold at Rs 18,700 per maund, 1000 bales of Pir Wassan were sold at Rs 18,500 per maund, 1800 bales of Shahdad Pur were sold at Rs 18,500 to Rs 18,700 per maund, 4200 bales of Tando Adam were sold at Rs 18,000 to Rs 18,700 per maund, 2400 bales of Rohri were sold in between Rs 18,300 to Rs 18,700 per maund, 1800 bales of Saleh Pat were sold in between Rs 18,500 to Rs 19,500 per maund, 1400 bales of Yazman Mandi were sold at Rs 19,000 per maund, 200 bales of Ahmed Pur East were sold at Rs 19,400 per maund, 200 bales of Hasil Pur were sold at Rs 19,500 per maund, 800 bales of Fort Abbas were sold at Rs 19,000 to Rs 20,000 per maund, 600 bales of Chichawatni were sold at Rs 19,000 per maund, 1800 bales of Haroonabad were sold at Rs 19,000 to Rs 19,500 per maund, 800 bales of Shujabad, 600 bales of Khanewal were sold at Rs 19,000 to Rs 19,500 per maund, 800 bales of Vehari were sold at Rs 19,500 to Rs 19,600 per maund, 1600 bales of Burewala were sold at Rs 18,500 to Rs 19,000 per maund, 400 bales of Gojra were sold at Rs 19,000 per maund, 800 bales of Marrot were sold at Rs 19,500 to Rs 20,000 per maund, 400 bales of Kachi Wala were sold at Rs 19,000 to Rs 19,500 per maund and 600 bales of Mian Channu were sold at Rs 19,000 per maund.

The ICAC in its monthly forecast has painted a gloomy situation for cotton. It stated in its press release that a lack of precipitation is setting off alarm bells among some of the world’s top cotton producers, with China, the United States, India, and Pakistan all suffering from some degree of drought. The USA has already reduced its projections for the 2023/24 season by 550,000 tonnes, and more cuts could be coming.
If that weren’t bad enough, major economic factors could come into play as well. Disinflation has taken hold in China, which could result in a host of negative developments, including reduced business revenues, wage deflation, and decreasing investments. From the outside looking in, it appears China is not taking aggressive action to stop deflation.

And even if China’s Central Bank takes the necessary actions, perception can sometimes be a reality. If people don’t believe things are getting better, then they probably won’t, no matter what actions the government takes. When consumers start hoarding their cash and postponing purchases, demand for many products — including cotton — will suffer.

In the United States export sales were higher last week but demand is still a major concern. Despite posting a marginal loss on Thursday, December futures finished August at the upper end of the range established throughout the month. Chinese cotton prices continued to gain ground, making U.S. cotton prices more attractive. Additionally, worries about the crop in not only the U.S. but also in India and China provided an additional boost to cotton prices. Cotton futures pushed further up as Hurricane Idalia made landfall on Wednesday and damage to the crop in the Southeast was unknown. A weak Export Sales Report caused prices to trade on both sides before eventually finishing lower on Thursday. Last week, December futures increased 173 points to settle at 87.

82 cents per pound. Although daily volumes traded appeared to be light, total open interest gained 11,654 contracts to hit 212,352.

Outside markets were higher much of the week, despite an unclear economic outlook from the Fed last Friday and mixed data releases. At last week’s annual symposium of global central bankers, the Fed said inflation had peaked but is still too high.

This means that more interest rate increases are not out of the question. Although economic data has been mixed, the U.

S. Dollar has been strong and finished at a two-month high early in the week. The U.S. July PCE deflator, the Fed’s preferred measure of inflation, increased 3.3 percent year-over-year and 0.3 percent month-over-month. This was right in line with what the market expected. The U.S. consumer continues to show resilience. July personal spending rose 0.8 percent month-over-month, which was slightly stronger than market expectations. U.S. initial jobless claims were reported at 228,000, lower than market expectations and showing a persistently strong labor market.

The Export Sales Report for the week contained higher sales when compared to the week prior, but demand for U.S. cotton is still a concern. Net sales of 61,400 Upland bales and 4,600 Pima bales were reported for the 2023/24 marketing year. Although sales were higher this week, they are still at the lower end of what is typically reported for this time of the year. Noticeably absent from buyers of Upland cotton this week was China. The biggest buyer was Costa Rica, booking 23,400 bales, followed by Bangladesh with 10,000 bales, Vietnam with 7,300 bales, Indonesia with 6,700 bales, and Pakistan with 6,300 bales. Cancellations totaled 19,300 bales on this report. A total of 214,100 Upland bales and 3,100 Pima bales were exported for the week.

The big weather news this week was not the excessive heat and little moisture received in the Southwest, but Hurricane Idalia hitting Florida and bringing heavy rain to parts of the Southeast. The crop in that area is a little behind, so while the rain will affect some portions, overall damage to the crop will likely be minimal. The U.S. crop conditions were unchanged from the week before. South Texas harvest has continued with little interruption in the past week, having warm temperatures and mostly open skies to thank. West Texas had some scattered rain showers mid-week. Unfortunately, the precipitation received was too light to make a substantial difference where it fell. It is forecast to be hot and dry again in the coming week, but it appears the relentless triple-degree days have backed off for the time being.