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Saturday, February 24, 2024

All you need to know about cotton this week

The local cotton market on Thursday remained steady and the trading volume remained low. However quality cotton rates touched Rs18000 per maund because of appreciation of dollar and slow arrivals of the commodity.

In Sindh the rate of cotton fluctuated between Rs 15,200 to Rs 18000 per maund. The rate of Phutti in Sindh ranged between Rs 6,000 to Rs 7,600 per 40 kg. The rate of cotton in Punjab was between Rs 16,000 to Rs 18,000 per maund and the rate of Phutti in Punjab ranged between Rs 6,000 to Rs 7,700 per 40 kg. The prices however remained suppressed in Balochistan as the commodity was sold from Rs 15,500 to Rs 16,000 per maund while the rate of Phutti was the highest in the country ranging between Rs 7,200 to Rs 8,800 per 40 kg.

Around, 200 bales of Khair Pur were sold at Rs 16,000 to Rs 16,200 per maund, 200 bales of Akri, 200 bales of Halanni were sold at Rs 16,150 per maund, 400 bales of Rasoolabad were sold at Rs 15,500 per maund, 600 bales of Haroonabad were sold at Rs 16,000 per maund, 1400 bales of Mian Wali were sold at Rs 17,350 to Rs 18,000 per maund, 800 bales of Layyah were sold at Rs 16,300 to Rs 17,000 per maund, 200 bales of Lodhran were sold at Rs 16,800 per maund, 800 bales of Fort Abbas were sold at Rs 16,400 to Rs 17,000 per maund and 2400 bales of Yazman Mandi were sold at Rs 16,000 to Rs 16,500 per maund.

The Spot Rate of Karachi Cotton Association remained unchanged at Rs 17,200 per maund, while polyester Fiber was available at Rs 350 per kg.

India has harvested its lowest cotton crop this year in the last 15 years. The pest attacks have played havoc with cotton in Punjab, Haryana and Rajasthan. The quality of cotton has also been impacted. Indian millers are contemplating to import quality cotton.

In Africa the farmers in South Africa are shifting to cotton that pays them more than the soya bean crop but in Uganda the cotton farmers are facing exploitation being offered around $1 per kg for their produce against the global average of $ 0.86 per pound.

The news from Brazil and Australia is encouraging, with Brazil hoping to replace the United States as the largest exporter of white gold. In the United States December futures fell below recent long-term trading range for most of the week. Meanwhile, adverse weather in coming week could hinder harvest activities across Texas, Oklahoma, and Kansas

The cotton market stayed in the lower end of the trading range recently established for most of the week. Cotton prices went into the weekend settling at the lowest close since August of this year. Many issues were credited for the drop including weaker Chinese cotton prices and the idea that more cotton is readily available in the U.S. now that harvest has started to advance throughout the country. On Monday, futures opened lower but eventually turned and settled higher from fresh export interest and rain on an open crop in the Southwest. A strong U.S. Dollar and mixed economic news kept cotton futures trading in a pretty tight range most of this week. An improved Export Sales Report brought December futures back to last week’s close. Last week December futures settled at 84.59 cents per pound, managing to edge out a small gain of 32 points from the week prior. Certificated stock increased 12,501 bales, finishing at 70,706 bales, and continuing to stay at the highest level since September 2021. Daily trading volumes were lower this week and total open interest also declined 11,684 contracts to 236,394.


Stocks fell under pressure this week as earnings reports and geopolitical tensions continue to weigh on the market. The conflict between Israel and Hamas continues, with a ground invasion now expected from Israel, and many still worried about the conflict spreading further. The Federal Open Markets Committee (FOMC) meets again on Tuesday and Wednesday of next week. It is likely that the Fed will pause interest rates at this meeting, but the economic data released this week was generally hawkish where interest rates are concerned. The 10-year U.S. Treasury note surged this week, reaching 5 percent for the first time in 16 years. U.S. Gross Domestic Product (GDP) showed robust growth for the third quarter, expanding at a 4.9 percent rate compared to the 4.3 percent expected by analysts. The growth stemmed from strong consumer spending and the resiliency shown by the job market over the past quarter. The weakness in stocks helped the U.S. Dollar rise, providing a headwind to commodities much of the week. Despite the strong economic news, a slowdown is still expected in 2024 and markets are anticipating the Fed will begin cutting interest rates midway through next year.

An uptick in demand for U.S. cotton was reported on the Export Sales Report for the week. As expected, the recent price dips stirred up a bit more demand than has been reported in previous weeks. A net total of 186,100 Upland bales were sold for the 2023/24 marketing year. The biggest buyer for the week was China, booking 98,500 bales, followed by Bangladesh with 44,900 bales, South Korea with 5,700 bales, and Taiwan with 3,900 bales. Unlike the increased sales seen, shipments were dismal with 98,000 bales exported. This was a marketing year low, and shipments continued to stay behind the pace needed to reach the USDA export expectation. Pima sales were also strong for the week, with a total of 14,100 Pima bales sold and 4,400 bales shipped.

Harvest and classings have really ramped up in the past week across West Texas, Kansas, and Oklahoma. Rain was received across the region early in the week, limiting harvest activities and causing concern amongst traders and producers on how the weather will affect the open bolls remaining on the plants. Open skies and dry weather are forecast going into the weekend, but another cold front and rainy weather are expected as the week begins, which could hinder harvest activities. Harvest is slightly above the usual pace in the U.S., with 41 percent of the crop harvested versus the 39 percent average. Texas and Oklahoma are right in line with the 5-year average harvest pace, but Kansas is far ahead of the average, which is typically 13 percent at this point in the year.

Although the crop size is projected to be smaller than average, gins are beginning to operate at capacity and cotton will be entering warehouses at a normal daily rate, which is a change compared to last year. The Export Sales Report, daily classing reports, and cash market offers will retain their usual focus, but next week’s attention will be on the Federal Open Markets Committee meeting.

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