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Sunday, April 21, 2024

Global cotton scenario this week

The local cotton market stayed firm with satisfactory trading volumes throughout the week. The rate of cotton in Sindh and Punjab ranged between Rs 20,000 to Rs 22,000 per maund. Phutti prices in Punjab increased sharply to touch between Rs 10,000 per 40 kg, although some stocks were also available at Rs8000 per 40 kg. .

On Thursday 800 bales of Deharki were sold at Rs 22,000 per maund, 600 bales of Mehrab Pur were sold at Rs 21,900 per maund, 1200 bales of Rahim Yar Khan were sold at Rs 21,000 per maund, 1,000 bales of Noor Pur Noranga were sold at Rs 22,000 per maund, 600 bales of Faqeer Wali were sold at Rs 20,500 per maund, 400 bales of Chichawatni were sold at Rs 20,800 per maund and 400 bales of Haroonabad were sold at Rs 21,000 per maund.

All major cotton exporting countries are trying to market their produce to the consuming countries mostly based in India. China remains the largest cotton buyer in the world despite producing enough cotton to cater to its needs.

Brazil, Australia and the United States send delegations around the world to lure consumers. The market is so competitive that some large buyers demand that the US for instance should give them duty concessions on clothes and textiles produced from US cotton. Pakistan because of low cotton production in recent years is importing cotton from the US, Brazil and central Asian countries.

Cotton is one of the most valuable crops grown even in the U.S., with a harvest value of some US$7 billion yearly. It is cultivated across a crescent of 17 states stretching from Virginia to California and is used in virtually every type of clothing, as well as in medical supplies and home goods such as upholstery.

Cotton grows inside a hard, fibrous case called a boll. About 100 days after planting, the bolls mature and split open, revealing thousands of fluffy white fibers inside. Each boll contains 20 to 40 seeds with fibers attached to them, which is why the cotton plant’s fruit is called seed cotton.

Picking cotton manually, as is still done in some major producing countries, is a meticulous task. Workers have to bend to reach the bolls and can hurt their hands on hard, dry parts of the plants. To harvest the seed cotton, they have to grab and twist it to separate it from the boll without leaving fiber behind.

Starting in the 1930s, cotton farmers in the U.S. shifted from manual labor to large, heavy harvesters. Now the industry is entering a new stage that promises to be more efficient and precise. Americans have now developed a robotic cotton harvester that picks cotton with less damage to the product and the soil where it grows.

Traditional mechanical harvesters can be up to 14 feet long and weigh more than 30 tons. They remove cotton effectively without damaging the plants but also can cause problems. One issue is prolonged fiber exposure. Cotton bolls don’t all mature at the same time; the first open bolls in a field may wait for up to 50 days to be picked, until more bolls around them ripen.

Another challenge is that harvesting machines compact the soil as they roll over it. This makes it harder for water and fertilizer to penetrate down to plant roots. And the machines cost roughly US$1 million apiece but are used for only two to three months each year.

Harvesting robots use cameras and sensors to detect when crops are ready to pick and can remove them without damaging the plant. For cotton, robotics offers more targeted picking of bolls that are ready to harvest. It produces better-quality cotton fiber by picking seed cotton as soon as the bolls open, without leaving it exposed to the weather. The robot targets the seed cotton and avoids touching other parts of the plant. With robotic picking, cotton farmers don’t need to use defoliants to remove leaves from the plants prior to harvesting.

The robot uses a deep-learning algorithm that has been trained to recognize open bolls on cotton plants. It uses a stereovision camera to calculate their 3D spatial coordinates, which it transfers to the robotic arm. A control algorithm monitors each cotton boll to ensure that the robot picks as much seed cotton as possible.

According to the Cotton Brazil report released 16th Feb the most recent estimates by Abrapa (Dec/23) indicate that the 2024 cotton crop in Brazil will be 12 percent greater in planted area (1,867 million hectares) and 3 percent larger in production, with 3.37 million tonnes. 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 of 2023.

The country that imported the most Brazilian cotton in January was China: 153.7 thousand ton (61 percent of the total). Bangladesh and Vietnam came next, both with approximately 30 thousand ton purchased in the month. Pakistan imported around 5000 ton which was 2 percent of Brazilian exports. The Cepea price indicator ended January at 80.6 US$ cents/pound, 2 percent below the price at the beginning of the month. At the same time, ICE (first contract) increased 5 percent resulting in the difference between domestic and international prices reaching -149 in January.

Year after year, the commitment of Brazilian cotton farmers to responsible cotton production grows. The 2022/23 crop reached the record mark of 2.5 million of tonnes of socio-environmentally certified cotton lint. This volume corresponds to 82 percent of the country’s total production (3.1 million tonnes) and represents a 28 percent increase in relation to the 2021/22 agricultural season.

In the United States cotton prices continued higher for the fifth straight week, staying at the highest level since early October. Daily trading volumes were high due to speculative buying and index funds rolling. Trading ranges each day were relatively tight, but prices managed to gain ground. March futures settled at 89.10 cents per pound, up 261 points for the week. May open interest overtook March this week, becoming the lead contract. May futures settled at 89.68 cents per pound, up 204 points for the week.

Total open interest reached its highest level since 2022, increasing 11,901 contracts to 265,444.Major indexes set new highs throughout the week, despite hawkish Fed comments. U.S. added 353,000 jobs in January, the largest increase in a year and almost double of what was expected. Corporate earnings continue to be reported, many coming in higher than expected.

Friday’s robust jobs report was backed up by lower-than-expected U.S. weekly initial unemployment claims.  Fed officials have stated they are in no hurry to cut interest rates, heavily discounting the chances of a rate cut happening at the March FOMC meeting. Throughout 2023, the U.S. imported more goods from Mexico than China for the first time in over two decades.

Crude prices jumped at the end of the week on news of increasing geopolitical tensions. Demand for U.S. cotton remained steady for the week. A net total of 284,100 Upland bales were sold for the week, keeping sales above average for this time of the year. New crop sales of 34,600 bales were reported. A total of 248,500 Upland bales were exported, below average for what we typically see at this time of the year.

Shipment disruptions in the Red Sea have exporters worried about increased costs and delays.A net total of 9,500 Pima bales were sold and 11,900 bales were shipped for the week.

The WASDE report provided overall bullish figures for the market to trade on. The U.S. export estimate was raised to 12.3 million bales, a necessary change to keep up with the sales pace. A decline in U.S. ending stocks tightened the stocks-to-use ratio to 19.93 percent, making this only the second time it was below 20 percent on the February report.   The U.S. crop was unchanged at 12.43 million bales. World consumption increased to 112.46 million bales, a marginal increase of 30,000 bales. Global ending stocks decreased 680,000 bales to 83.70 million bales.

The quantity of trading and new information that became available this week will likely continue into next week. USDA’s Annual Agricultural Outlook Forum will be held next Thursday and Friday. This will provide the only look at USDA’s expectations for the 2024/25 crop until the first balance sheet is posted in May.  The National Cotton Council’s Annual Meeting will also take place next week. They will release their Economic Outlook and Planting Intentions for the 2024/25 crop on Sunday, February 18.  

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