Cotton trading remained steady during the current week but cotton rates remained unchanged in Sindh, Punjab, and Balochistan with Karachi Cotton Association (KCA) also keeping the cotton spot rate unchanged for the second consecutive day at Rs 17,935 per maund.
The total arrival to date is around 1.428 million bales which is a healthy sign. It also indicates that rainwater had not caused any significant damage to cotton crops. The country it seems is well poised to produce more than 10 million bales. The only risks are heavy rains or floods going forward.
Currently, the biggest issue in the cotton crop is moisture and the millers have no option but to compromise on it as it is a natural phenomenon. Otherwise, all the parameters of the cotton crop are good and it is hoped that quality will improve with every passing day. Experts hope that government commitment to ensure the support price of 8,500 per maund has saved farmers from exploitation due to which the quality market will remain hovering around Rs 17, 500 to Rs 18,500 per maund.
Meanwhile, 200 bales from Mir Pur Khas today were traded at Rs 17,600 per maund, 200 bales from Rohri were traded at Rs 17, 875 per maund, 200 bales from Dour at Rs 17,800 per maund, and 200 bales of Sarhari at Rs 17, 850 bales.
While 2800 bales from Tando Adam, 2200 bales from Shahdad Pur, and 2000 bales from Sanghar fetched a price of Rs 17,600 to Rs 17,700 per maund. 800 bales from Ahmed Pur East were traded at Rs 18,500 per maund.
From Punjab, 2600 bales of Chichawatni were traded at Rs 17,900 to Rs 18,300 and 600 bales from Mamo Kanjan and 500 bales from Mian Chunnu fetched the price of Rs 18,100 to 18, 200 per maund. 800 bales from Vehari were traded at Rs 18, 250 to 18,300 per maund. 200 bales from Mongi Bangla and 200 bales of Mureed Wala were traded at Rs 18,150 per maund and another 400 bales from Sumandari were traded at Rs 17,900 per maund.
As per Pakistan Cotton Ginners Association’s second issuance of data, Pakistan produced 1.42 million bales in the first month of picking alone against last year’s total output of 4.91 million bales, showing 29.08 percent of the previous year’s final yield.
Sindh in the first month of picking this year, ending August 1, 2023, produced 1.04 million bales against last year’s total provincial production of 1.87 million bales, recording 55.35 percent of the previous year’s final output.
Sanghar District produced 0.72 million bales in the first month of picking against 813,526 bales output of silver fiber last year. Hence, Sanghar District has already produced 88.64 percent of its last year’s final production, driving cotton recovery after last year’s historic plunge.
Other refreshing signs of good overall output in the ongoing year have been the restoration of cotton plantations in non-core districts of Punjab. Vehari, which is infamously known for the emergence of the cotton leaf curl virus, has risen as one of the leading producers of cotton in the non-traditional belt.
The non-core districts of Punjab including Vehari (70,000 bales), Sahiwal (45,000 bales), Toba Tek Singh (27,000 bales), Faisalabad 11,000 bales) and Jhang (7,000 bales) also showed miraculous recovery as the output of around 0.16 million bales has been registered so far in the first month of harvesting. This volume represents approximately 40 percent.
Cotton arrival in Punjab was pegged at 0.38 million bales till August 1, as compared to 0.19 million bales reported on July 15, 2023, showing an increase of 95.4 percent.
On an overall basis, cotton arrivals witnessed a significant increase of 66.5 percent on August 1 compared to July 15, showed the latest fortnightly data. Total cotton arrival in Pakistan rose to 1.42 million bales as of August 1 compared to 0.85 million bales recorded on July 15, 2023, recording an increase of 0.57 million bales.
Experts, however, cautioned that August and September are very important as the cotton crop is going through a critical stage. “Any carelessness at this stage can lead to reduced yield, so inspect your crop daily and do pest scouting twice a week,” said an official. “If a pest exceeds the economic injury limit, spray pesticides immediately with the advice of agronomists.”
In the United States, December futures fell sharply after over a week of Bull Run. Net reductions in export sales reports were reported that impacted the market. December futures had eight days of consecutive gains, reaching their highest level since August 2022, but fell sharply to finish the week. Cotton futures continued their rally this week, catching support from macro tailwinds and speculative buying. News out of China that the government is considering economic stimulus measures and worries how the heat wave across the Southwest will affect the crop provided further support. December futures hit a high of 88.39 cents per pound on Thursday but plunged upon the release of a weak U.S. Export Sales Report. For the week ending July 27, December futures finished at 84.38 cents per pound, up just 7 points for the week. Trading volumes were heavy this week, and total open interest increased by 20,828 contracts to 202,972, reaching its highest level since February.
Stocks were higher most of this week but weak macroeconomic data curbed gains last week. Optimism where inflation is concerned, and overall strong quarterly earnings helped boost the market early on. The Dow rose for 13 consecutive days, the longest winning streak since 1987, but the streak was broken on Thursday. The Federal Open Markets Committee (FOMC) met this week and raised interest rates by 25 basis points, bringing interest rates to the highest level since March 2001.
Although this increase was expected, the move caused major indexes to finish lower for the week. U.S. Gross Domestic Product rose 2.4 percent for the second quarter, coming in stronger than what many analysts expected. The job market continues to show resilience. Initial unemployment claims fell to 221,000, which is a 5-month low. The Fed did not give any indication whether there would be more interest rate hikes, but analysts have become more confident that a soft landing may occur where the U.S. economy is concerned. The U.S. Dollar was mixed but gained ground at the end of the week from the stronger-than-expected economic data released.
Tuesday, August 1, marked the beginning of the 2023/24 marketing year. While this week’s net reductions were prominent, it was not an entirely surprising number. For last week net reductions of 18,700 Upland bales were reported for the 2022/23 crop year. Of the total 23,900 bales canceled, 19,900 of those bales were from Turkey. There is little cotton left to sell for the 2022/23 crop, so the new crop sales are the biggest determinant of demand right now. Net sales for the 2023/24 crop year totaled 80,600 bales, which is a bit lower than what is typically seen at this point in recent years. In addition to disappointing sales, shipments were also lower than what was expected. A total of 197,800 bales were shipped for the week, meaning the U.S. will likely not hit the 12.9 million bale export target set by USDA. A net total of 300 Pima bales were sold for the current marketing year and 4,900 bales were booked for the next marketing year. Shipments for Pima were also down from last week, with 3,200 bales exported.
Heat stress has become a major concern across areas in West Texas, Oklahoma, and Kansas. Excessively hot temperatures have continued to be persistent, marking one of the hottest Julys on record. The extreme heat is set to continue into next week. Rain and seasonable temperatures would be welcome to ease the stress from heat. Defoliants have begun to get sprayed, meaning harvest is close in South Texas. Although it has also been hot in South Texas, the heat and open skies will ensure that harvest will advance without interruption. Overall crop conditions improved slightly throughout the country.
Next week should be another relatively quiet week where cotton news is concerned. The China Reserve will begin auctions on July 31, so traders will monitor the impact that has on U.S. cotton prices. As always, the weather forecast, Export Sales report, and Crop Progress and Condition report will be closely watched.
All you need to know about cotton this week
