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Saturday, February 24, 2024

Cotton scenario and its dynamics worldwide

The cotton market in Pakistan witnessed subdued activity, probably because the mills held purchases due to election activities in the country. On Thursday, the trading volumes remained low.

Cotton prices, though, remained stable. In Sindh, the cotton with a high trash percentage fetched Rs 18,500 per maund, while the cleaner variety was sold at Rs 20,500 per maund. In Punjab, the rates of higher trash variety were higher by Rs500 per maund and were sold at Rs 19,000. In contrast, the rate of cleaner variety was lower than in Sindh and was traded at Rs 20,000 per maund. Phutti prices stayed stable during the week, fetching between Rs 8,000 and Rs 9,300 per 40 kg. Balochistan’s rates remained lower than Sindh and Punjab, recording cotton prices between Rs 17,500 and Rs 18,000 per maund.

Notable transactions on Thursday included the sale of 600 bales of Tando Adam at Rs 20,000 per maund, 200 bales of Hasil Pur, and 200 bales of Fort Abbas at Rs 19,200 per maund, along with 600 bales of Haroonabad sold at Rs 19,250 per maund.

The Spot Rate remained steady at Rs 20,000 per maund, indicating market stability. Additionally, polyester fiber was available at Rs 365 per kg.

In India, the current price of a Cotton 29mm is ₹55,600 and is witnessing a declining trend of 0.68 percent. The retail price range for Brazilian cotton is between US$ 1.56 and US$ 1.64 per kilogram or between US$ 0.71 and US$ 0.75 per pound(lb). The retail price range in Brazilian Real for cotton is between BRL 7.78 and BRL 8.21 per kilogram or between BRL 3.53 and BRL 3.72 per pound(lb) in Brasilia and Rio de Janeiro. The retail price range for Australian cotton is between US$ 4.06 and US$ 8.71 per kilogram or between US$ 1.84 and US$ 3.95 per pound(lb). The retail price range in Australian Dollars for cotton is between AUD 6.10 and AUD 13.10 per kilogram or between AUD 2.77 and AUD 5.94 per pound(lb) in Canberra and Melbourne.

The retail price range for Azerbaijan cotton is between US$ 0.87 and US$ 1.17 per kilogram or between US$ 0.39 and US$ 0.53 per pound(lb). The retail price range for cotton in Azerbaijan Manat is between AZN 1.47 and AZN 1.98 per kilogram or between AZN 0.67 and AZN 0.90 per pound(lb) in Baku and Ganja. The retail price range for South African cotton is between US$ 2.95 and US$ 3.93 per kilogram or between US$ 1.34 and US$ 1.78 per pound(lb). The retail price range in Rand for cotton is between ZAR 57.34 and ZAR 76.45 per kilogram or between ZAR 26.00 and ZAR 34.67 per pound(lb) in Johannesburg and Cape Town. The retail price range in Yuan Renminbi for cotton is between CNY 5.33 and CNY 6.24 per kilogram or between CNY 2.42 and CNY 2.83 per pound(lb) in Beijing and Shanghai.

The International Cotton Advisory Committee has expressed concern that shipping problems are again plaguing the cotton and textile industry, although not nearly to the degree the supply chain suffered during the COVID-19 pandemic. Finished goods will be affected more than raw cotton, making the situation particularly painful for merchants and mills. 

Geopolitical unrest in the Red Sea area has driven shipping prices significantly higher in recent months, with trade routes between West Africa and Asia and Europe and Asia being impacted the most. Other negative impacts include:

Longer delivery times due to the rerouting of ships could lead to order delays and cancellations. Higher shipping costs will add to the already high inflation. Products will take longer to reach the markets — a massive problem for seasonal textiles and apparel. The cotton trade will be affected if high shipping costs spread to other regions. The cotton and textile industry has experience in overcoming logistical problems, as it did during COVID-19 and the blockage of the Suez Canal. Despite the challenges, global cotton trade is up more than 10 percent over last season.

The Secretariat’s current price forecast of the season-average A index for 2023/24 ranges from 81.02 cents to 103.61 cents, with a midpoint at 90.88 cents per pound.

Brazil’s monthly report released on February 1 states that as of January 11th, 47 percent of the 2024 cotton crop had been planted in Brazil. Forward sales are already over 54 percent. In December, Brazilian exports totaled 350.8 thousand tonnes – 100 percent more than the volume recorded in 2022. This resulted in total revenue of US$ 684.4 million. From January to December 2023, Brazil shipped 1.6 million tonnes. Revenue from exports totaled US$ 3.07 billion for the year.

China remains the leading importer of Brazilian cotton. With 219 thousand tonnes shipped there in December, the country accounted for 63 percent of the total. Vietnam (111.7 thousand tonnes; 10 percent) and Bangladesh (90.5 thousand tonnes; 8 percent) take the next positions in the ranking. Pakistan imported 15375 tons of cotton from Brazil during this period.

Brazil exported 1,121 thousand tonnes from August to December, 17.7 percent higher than that recorded in 2022—the second-best performance since 2018. Total revenue in the period reached US$ 2.14 billion.

Abrapa’s most recent estimates (Dec/23) indicate that the 2024 cotton crop in Brazil will be 11.6 percent greater in planted area (1.967 million hectares) and 3.1% larger in production, with 3.37 million. The Cepea indicator closed December at 82.5 US$ cents/pound, corresponding to an increase of 3.4 percent. The average difference between domestic and international prices reached +41 points monthly. If these estimates are confirmed, the average yield for Brazilian cotton will be 1,805 kg/ha in 2024 – 7.6 percent below the record rate in 2023.

In the United States, the cotton futures finished higher for six of the past seven trading sessions. March futures went into the weekend making substantial gains, boosted by a vital Export Sales Report and an improved technical outlook. Prices continued to advance on Monday but pulled back marginally on Tuesday. Reports of increased demand inquiry and potentially lower cotton stocks in the U.S. have helped futures gain ground this week. By Wednesday, cotton futures had pushed through resistance and finished above .8500 cents per pound for the first time since October 2023.

Prices continued increasing and finished the week strong after another respectable Export Sales Report and robust technical signals were released. For the week ending January 25, March futures settled at 85.76 cents per pound, up 325 points from the week prior. Volumes were massive this week, and the past Friday held the highest volume traded ever on the March contract. Total open interest managed to add another 28,483 contracts to reach 236,753, remaining at the highest level since November 2023.

The stock market continued its ascent higher, with each significant index reaching all-time highs at some point during the week. The fourth quarter U.S. Gross Domestic Product (GDP) was released on Thursday and showed stronger-than-expected economic growth. Annual growth showed that the economy grew at a rate of 3.3 percent in 2023, with consumer spending likely being a large part of the growth. Fourth-quarter corporate earnings have been stronger than anticipated during the reporting period, boosting the stock market. U.S. initial jobless claims increased more than expected but continue to stay at a historically low level.

The Federal Open Market Committee (FOMC) will account for the recent data releases when they meet next Tuesday and Wednesday. It is expected that the FOMC will continue to hold interest rates at 5.25 percent to 5.5 percent. Robust economic data, tensions in the Red Sea, and tighter global supplies helped crude oil prices increase sharply to finish at an almost two-month high.

U.S. export sales were down compared to the week prior, but a solid amount was still sold on the global market. For the week, 207,000 Upland bales were sold, and 142,200 bales were shipped. The biggest buyer for the week was China, booking 103,300 bales, followed by Vietnam with 33,800 bales, Bangladesh with 21,700 bales, Pakistan with 15,100 bales, and Turkey with 11,000 bales. Sales are far above the pace needed to reach the 12.1 million bale export estimate, but shipments must catch up to the number required. 4,700 Pima bales were sold, and 3,700 bales were shipped for the week.

The arctic blast experienced last week was followed by rain in parts of the Southwest. Although it is not time to plant, any rain right now will help add much-needed moisture back to the soil. Next week will focus on the FOMC meeting, but the Export Sales Report will hold its usual attention where the cotton market is concerned. Index fund rolling will start soon, meaning market activity should continue to increase. March options expire in two weeks, and March’s futures first notice day is less than a month away.

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