The euphoria of a bumper crop this year is over as Punjab which accounts for 70 percent of the total cotton production in the country lags behind Sindh which accounts for the remaining 30 percent. The production in Sindh increased but declined in Punjab.
Market pundits now predict a crop of about nine million bales as the cotton season closes in December. This is 3.5 million bales less than the original estimates of the government. It means the domestic industry would again have to depend on imports. The large exporters have already started placing orders in the United States and Brazil. Fortunately the current prices are soft this year and buyers see no risk.
Last week the local cotton market remained steady but the trading volume remained low. Despite imminent shortage the cotton rates in Sindh remained stable fluctuating in the same range of Rs 15,500 to Rs 18,000 per maund as last week. The rate of Phutti in Sindh was between Rs 5,500 to Rs 7,200 per 40 kg. The rate of cotton in Punjab was also the same as last week ranging between Rs 16,500 to Rs 18,000 per maund but rate of Phutti in Punjab was higher than Sindh ranging between Rs 6,500 to Rs 8,200 per 40 kg. The rate of cotton in Balochistan was Rs 17,000 to Rs 17,500 per maund. The rate of Phutti ranged from Rs 6,500 to Rs 8,500 per 40 kg.
On Thursday 400 bales of Saleh Pat were sold at Rs 16,700 per maund, 400 bales of Chishtian, 400 bales of Fort Abbas and 600 bales of Yazman Mandi were sold at Rs 16,200 per maund. The Spot Rate remained unchanged at Rs 17,500 per maund. Polyester Fibre was sold at Rs 360 per kg.
Elsewhere in the world cotton ginning in Brazil has reached 80% of the crop and HVI testing is at 7 percent for this season. Planting of the 2024 crop is underway. The forecast for cotton lint production is 3.3 million ton (+2 percent) from a planted area of 1.81 million hectares (+8 percent) (Abrapa field survey in October 2023). Abrapa’s crop estimate is for a national average cotton yield of 1,931 kg per hectare in 2023, an increase of 21 percent over the previous year, and 1,818 kg per hectare in 2024.
The Brazilian Cotton Growers Association (Abrapa) was part of the Brazilian Ministry of Agriculture and Livestock delegation that visited India at the beginning of November. India is among the ten priority countries for Abrapa. Estimates indicate that India will need to purchase 500 thousand ton of cotton in 2023/24 and Brazil is willing to supply cotton to the Indian textile industry.
The vice-president of Abrapa, Celestino Zanella, and the director of International Relations, Mr. Marcelo Duarte, met with the general secretary of the Confederation of the Indian Textile Industry (CITI), Mrs. Chandrima Chatterjee, to explain their request. The two organizations have been partners since 2021 when a Memorandum of Understanding was signed between CITI Abrapa and the National Cotton Shippers Association (Anea). A meeting between the Indian Ministry of Commerce, Brazilian Minister of Agriculture and Livestock, Mr. Carlos Fávaro, the president of the Brazilian Trade and Investment Promotion Agency, and Brazilian ambassador to India, Kenneth Nóbrega, was held in order to strengthen the request to remove the import tariff.
India is expected to require more cotton supply to fulfill the needs of its textile sector, and cotton from Brazil can be used to supplement the existing stock. During the India mission, the Brazilian delegation reiterated the quality of Brazilian cotton and its reliability as a supplier to the Indian market.
In October, Brazil shipped 225.7 thousand ton of cotton. This volume represents a 13 percent drop compared to October/2022 and total revenues of US$435.6 million. China remains as the main importer of Brazilian cotton. In the accumulated numbers, the country imported more than 322 thousand ton of cotton, which represents 62 percent of the total volume shipped overseas from August to October this year. Egypt, which was not open to Brazilian cotton until the beginning of 2024, now appears as the 10th largest importer of Brazilian exports.
In the United States the holiday-shortened trade week was busy with many traders clearing out the rest of their December positions. First Notice Day is on Friday, and daily volume has been active leading up to it. Prices continued to be range-bound this week, having little fundamental or technical data to trade on. One thing to note, however, was that China’s cotton prices were lower this week, which put a little pressure on ICE futures. With one less trading day being covered this week and no export sales to cover on this Cotton Market Weekly, news was light. For the week ending November 22, December futures settled at 79.58 cents per pound, up 90 points. March futures settled marginally higher than last week, finishing at 80.90 cents per pound, up 2 points from last Thursday. Certificated stock increased 3,246 bales to 88,552 bales. Total open interest declined to the lowest level since this past summer, falling 12,198 contracts to reach 194,350 contracts.
Cotton prices bounced back from last week’s low but stayed within the recently established trading range. The Goldman Sachs Commodity Index (GSCI) rolled up this week, keeping traders’ attention on Monday. Cotton futures managed to recuperate some of last week’s big losses. The Chinese Reserve announced that sales would cease, helping support cotton prices. A flat month-over-month CPI reading, and weaker dollar also provided a boost to prices early on. With First Notice Day quickly approaching, many traders are liquidating or rolling their positions in December forward. This has made a noticeable drop in total open interest, which fell 23,559 contracts to 206,548. A strong Export Sales Report and weaker economic data caused prices to trade both sides on Thursday, settling mixed for the day, but up for the week. For the week ending November 16, December futures closed at 78.68 cents per pound, up 216 points from the week prior. March futures settled at 80.88 cents, up 167 points from last week. Certificated stock increased 1,654 bales to 85,306 bales but has remained at that level since Tuesday.
There was a slew of economic data released this week, and stocks rallied on news that suggested the economy is slowing. The Consumer Price Index (CPI) for October was released on Tuesday, with the headline number coming in at 0.4 percent month-over-month, which is unchanged from September. Year-over-year CPI increased 3.2 percent, which was also below expectations and helped drive the rally in stocks. On Wednesday U.S. Retail Sales fell slightly, declining for the first time since March and sent another signal to markets that the economy is slowing. The Producer Price Index (PPI) declined 0.5 percent month-over-month, a surprise to analysts since many expected it to rise. The U.S. Dollar was weaker this week, helping boost demand for U.S. cotton overseas. However, the commodity space was under pressure this week. Crude oil in particular took a major hit, and prices declined to the lowest level since July. The news of the slowing economy has many now betting that the Fed will no longer raise interest rates, and a few believe they could potentially begin cutting rates earlier than expected.
The U.S Export Sales Report revealed net sales of 328,300 Upland bales and 13,900 Pima bales. The biggest buyer of Upland cotton was China, purchasing 176,200 bales, followed by Mexico with 35,000 bales, Vietnam with 32,600 bales, Bangladesh with 23,500 bales, and Turkey with 22,900 bales. Shipments were up slightly when compared to last week but are still behind the pace needed to meet USDA’s export estimate. A total of 112,900 Upland bales and 4,500 Pima bales were exported. Another good report is anticipated next week as well, since the lower price trend in cotton makes it more attractive on the export front.
Activity in outside markets was quiet, but major indexes continued to climb higher for the week. The stock market has fared well on positive comments from the Fed and encouraging corporate news. Last Fridays close marked three straight weeks of wins for the stock market, with Friday likely to make it four consecutive weeks. Crude oil came off last Thursday’s low but was under pressure on Wednesday when OPEC announced they would delay a meeting that was scheduled to take place on Sunday. The U.S. Dollar was lower, becoming weaker as foreign currencies rallied on stronger economic data and lower U.S. treasury rates. Geopolitical tensions have also eased slightly when it was announced that Israel and Hamas agreed to have a four-day humanitarian cease-fire to release hostages. The stock market is closed on Thursday for the Thanksgiving holiday.
While some traders will be waiting to see whether there are any fireworks in the December futures delivery process that begins with First Notice Day next Tuesday, the rest of the market is fairly done with transitioning their positions from December futures to March. Traders will be happy to turn their focus back to daily classing reports and weekly export sales.
Now that December is behind the vast majority of traders, focus will shift to the March contract and typical news releases. Many are expecting the report to hold another week of good export sales, as the past few weeks’ lower prices have increased demand. Now that harvest is 77 percent complete across the country, classing and receiving will be key focal points in the coming week. The market will be closed on Thursday and have shortened hours on Friday, but normal hours will resume on Monday.