Despite the shortage of local cotton and the inability to import cotton because of the dollar shortage, the spot rates of the commodity declined on Thursday by Rs300 per 37.5 kg in Karachi to Rs1 37.5 kg with trading volumes remaining low.
The spinning industry is not in good shape. The withdrawal of power and energy subsidies has further aggravated the situation. The value-added sector is not buying much because of a sharp decline in orders from western brands. The spinners are in a panic as the weavers are reluctant to buy yarn produced on subsidized power and energy at current low rates.
They cannot take the risk of producing yarn without power and gas subsidies. The export market for Pakistani yarn is dry which is evident from the constant decline in cotton yarn exports. The cotton market is bearing the brunt as ginners sitting in cotton stocks are unable to dispose of it.
The week started on a bearish note and ended in a more depressing way. The rate of cotton in Sindh ranged from Rs17500 to Rs 19500 per 37.5 kg. The rates were similar in Punjab with cotton prices ranging from Rs18000 to Rs19500 per 37.5 kg. The prices at the lower end were Rs500 higher than in Karachi but at the higher end were the same. The low prices however did not dent the rates of phutti that was available in Sindh at Rs7000-8300 per 40 kg showing no change over last week’s rates. In Punjab, the phutti rates ranged from Rs7000 per 40 kg to Rs9200 per 40 kg.
The cotton uptake in India also remained subdued, in fact, the declining yarn rates adversely affected cotton prices. North Indian cotton prices remained also stable after mild gains early in the week. Cotton prices increased by INR40-50 per 37.2 kg on Tuesday after a rise in cotton futures. However, the prices were unchanged by the weekend because of limited buying from spinners. Cotton arrival was noted at 15,000 bales of 170 kg each in north India. The natural fibre was traded at INR6150-6250 in Punjab, INR6150-6250 in Haryana, and INR6350-6425 per maund in upper Rajasthan. Cotton was sold at INR59000-61000 per candy of 356 kg in lower Rajasthan.
Meanwhile, Cotton Australia, the Australian Cotton Shippers Association, and the Cotton Research and Development Corporation are developing a Strategic Roadmap for Australian Cotton that will set the industry up for the future, secure market access and create value for growers, industry, and supply chain customers. They have placed a short on-line survey that will get broad feedback from all stakeholders on these key topics including what each target state should be and the way to get there. The survey is open to cotton growers and all of the Australian cotton industry as well as our supply chain including spinners, agents, brands, and retailers. The sponsors of the survey say this provides the chance to all stakeholders as it will impact their shared future on traceability, sustainably-certified cotton, data, human rights, and Australian cotton marketing.
The official US export sales data reveals that the net sales of 225,500 RB for 2022/2023 were up 97 percent from the previous week, but down 3 percent from the prior 4-week average. Increases were primarily for Vietnam (120,200 RB, including 8,400 RB switched from China and 1,000 RB switched from South Korea), China (35,800 RB), Turkey (16,900 RB, including decreases of 3,200 RB), Pakistan (10,400 RB, including decreases of 5,300 RB), and South Korea (10,100 RB, including decreases of 100 RB). Net sales of 12,800 RB for 2023/2024 were reported for Turkey (4,400 RB), Pakistan (4,400 RB), and South Korea (4,000 RB). Exports of 273,900 RB were down 5 percent from the previous week, but up 25 percent from the prior 4-week average.
The destinations were primarily Vietnam (78,000 RB), China (51,800 RB), Pakistan (38,200 RB), Turkey (29,900 RB), and Indonesia (13,700 RB). Net sales of Pima totaling 7,600 RB for 2022/2023–a marketing-year high–were up 99 percent from the previous week and up noticeably from the prior 4-week average. Increases primarily for China (2,900 RB), Vietnam (2,400 RB), Egypt (1,300 RB), Thailand (800 RB, including 200 RB switched from Japan), and Turkey (400 RB), were offset by reductions for Japan (400 RB). Exports of 1,500 RB were down 49 percent from the previous week and 64 percent from the prior 4-week average. The destinations were primarily to Thailand (600 RB), Bangladesh (300 RB), China (300 RB), and Indonesia (200 RB).
A week earlier the export sales were weaker, but nothing unexpected was shown in this report. Net sales of 114,500 Upland bales were reported for the 2022/23 crop year and reductions of 68,300 bales for the 2023/24 crop year. While the net reductions for the next marketing year looked worrisome, it was a reporting mistake for sales to Pakistan. The reductions of 87,100 bales showing up for Pakistan were mistakenly put on the 2023/24 crop year previously when in reality, were actually placed for the 2024/25 year. The biggest buyers in this report were Vietnam, purchasing 44,700 bales, followed by Turkey with 17,400 bales, China with 15,300 bales, Pakistan with 11,900 bales, and Mexico with 9,800 bales. Shipments finally reached the pace needed to meet USDA’s export expectations, making this an overall satisfactory export report. A total of 287,500 bales were exported for the week. Pima sales were up for the week, with 3,800 bales booked, while shipments were down slightly with only 2,900 bales exported.
Although it was a big week fundamentally for the cotton market, the release of the WASDE and Export Sales Reports left markets trading in the same range that has been present for the past few months. The biggest point of pressure came from outside markets when the Fed Chairman testified saying a bigger interest rate hike was not out of the question when the FOMC meets later this month. The market was pretty quiet up until this and dropped almost 200 points in response to the comments. The WASDE provided a somewhat neutral tone for cotton prices and export sales were weaker than usual, keeping May futures at the lower end of the trading range to finish the week. For the week ending Thursday, March 9, May futures settled at 82.18 cents per pound, down 153 points. Total open interest was more or less unchanged from the week before, increasing 651 contracts to finish at 186,433.
Outside markets had a wobbly week between the Fed Chairman’s testimonies and the release of macroeconomic data. Major indexes went into the weekend recovering from losses seen earlier in the week, boosted by data showing a weakening manufacturing sector. The biggest headline, and what sent markets down mid-week, is that the Fed is now saying a 50-basis point interest rate hike is not out of the question.
This sent stocks tumbling while the U.S. Dollar Index surged. The increase in the dollar was not good for commodities in general, with many finishing lower from this news. U.S. initial jobless claims increased to 211,000 for the week, showing a strong labor market and helping keep markets mixed. Nonfarm payroll also increased higher than expected to 311,000, reiterating that the labor market is still hot. Talks of inflation will continue to muddy the market, with many keen to see what the Federal Open Market Committee (FOMC) will decide when they meet in a couple of weeks.
The World Agricultural Supply and Demand Estimates (WASDE) revisions were released on March 8, with many hoping more insight would be provided into USDA’s thinking on the U.S. crop and U.S. exports. The report, however, left the U.S. side of the balance sheet unchanged, providing a neutral, if not slightly bearish, tone for cotton prices. Production for the U.S. is still at 14.68 million bales, exports at 12.00 million bales, consumption at 2.1 million bales, and ending stocks at 4.3 million bales.
The world side of the balance sheet had minor changes, with most revisions occurring with China’s figures. Global consumption decreased by 550,000 bales to 110.11 million bales and ending stocks increased by 2.07 million bales to 91.15 million bales. China was the main reason for the increase in global ending stocks, with ending stocks in the country being revised up to 2.00 million bales.
While most of the Cotton Belt has received adequate moisture over the winter months, drought continues to prevail across the Southwest. Overall, March is expected to be mild where temperature and weather are concerned across Texas, Oklahoma, and Kansas. The forecast currently shows there will be a mid-month burst of cooler air before the mild weather returns at the end of the month. Areas in South Texas have started to plant, and the continuing dry conditions and inadequate soil moisture levels could cause delays. The same rings true for other areas across Texas. With dry soils, little to no precipitation expected in the coming days, and cotton still fighting for acres with other commodities, moisture is desperately needed to help the number of planted acres for the upcoming season.
