The global cotton balance sheet witnesses a dynamic dance of figures amidst the 2023/24 U.S. cotton forecasts, unveiling reduced production and historic lows in mill use everywhere, including Pakistan
Drop and a surge in ending stocks reshape the narrative, while Turkey and Bangladesh play pivotal roles. Despite challenges, the market maintains resilience, with trade adjustments and a notable shift in the cotton landscape.
314,000 bales reduce U.S. cotton production to 12.8 million. The decrease is mainly attributed to a significant 500,000-bale reduction in the Texas crop. U.S. mill use is lowered by 150,000 bales, reaching 1.9 million bales. This is expected to be the lowest level since 1884, indicating a decline in spinning activity. Ending stocks are projected to be 100,000 bales, which is more down than in November, totaling 3.1 million bales or 22 percent of disappearance. But the projected upland cotton season-average farm price remains unchanged at 77 cents per pound.
In Pakistan, the trading in the local market remained steady throughout the week, including Thursday, but the trading volumes remained very low.
The cotton rate in Sindh ranged from Rs 15,500 per maund to Rs 17 500. At the same time, the rate of Phutti in Sindh fluctuated from Rs 5,000 to Rs 7,000 per 40 kg. The Prices of cotton in Punjab were almost the same. Only the minimum rate of the commodity was Rs300 per maund, higher at Rs 15,800 per maund, while the upper price was Rs 17,500 per maund, and Phutti prices were higher, ranging between Rs 6,000 to 8,000 per 40 kg.
The prices of cotton from Balochistan were registered at Rs 16,500 per maund on the lower side, which was much higher than Sindh and Punjab, but at the upper level, the price was more down to Rs 17,000 per maund and Phutti ranged between Rs 6,500 to Rs 8,200 per 40 kg.
World cotton consumption is projected to be 1.6 million bales lower. The reduction is primarily attributed to a 1.0-million-bale decrease in China’s consumption. Turkey’s forecast is down by 400,000 bales, the United States and Mexico are down, and Bangladesh is up by 100,000 bales.
Global cotton production is forecasted to be 540,000 bales lower than in November. Reductions in the United States, Turkey, and Mexico more than offset a 200,000-bale increase for Pakistan.
World trade is slightly down, with more significant expected imports by China (up 500,000 bales) nearly offsetting reductions in Turkey, Pakistan, and Bangladesh. Turkey’s more significant expected exports are offset by a 300,000-bale decrease for Brazil and smaller reductions elsewhere.
World-ending stocks are forecasted to be 900,000 bales higher this month. China’s projected stocks are up by 1.5 million bales. The total projected global stocks are 82.4 million bales, accounting for 72 percent of use.
A tale of contrasts marks the current cotton season—U.S. reductions meet global adjustments. China’s significant role in consumption and ending stocks emerges as a defining factor, showcasing its growing influence in the cotton market. As the industry adapts to shifts in production and trade dynamics, resilience remains a key theme, laying the groundwork for an intriguing and transformative period in the global cotton trade.
Meanwhile, in current trading, March Futures finished with solid gains in the United States. The U.S. production was cut to 12.78 million bales, and that of world use was cut to 113.73 million bales. The export sales from the US were down during the week.
March cotton futures made significant daily gains on Thursday, touching the limit before backing off but still settling at the highest level in over a month. Futures prices were down going into the weekend, trading on both sides throughout the day before eventually settling lower. Monday was a repeat, and prices dropped to the lower end of the short-term trading range. This pattern continued Tuesday through Thursday, but cotton prices settled with marginal gains from higher Chinese cotton prices. Weak demand is still a worry, but the focus for traders this week was the release of the WASDE.
A rally in commodities occurred Thursday with technical buy-stops in cotton, allowing prices to break out of the recent consolidation range. The week’s futures settled at 82.59 cents per pound, up 253 points. Daily volumes were relatively light until Thursday, when prices rose sharply. Total open interest managed to add 3,537 contracts to reach 197,083. A total of 81,643 bales were decertified this week, dropping certificated stock to 6,126 bales.
The stock market was mixed this week, but indexes fared well overall and maintained the gains made in November. Compared to last week, the economic data release was much lighter. China’s purchasing managers’ index (PMI) was higher than expected, but there are still worries that the economy is not recovering as planned. Crude oil continued its descent and dropped below $70/barrel for the first time since June this week.
The U.S. Dollar was also up for the week, getting a boost from news that China’s credit outlook was lowered. U.S. initial unemployment claims increased as anticipated, signaling that the labor market is slowing steadily. U.S. nonfarm payrolls rose 199,000, adding more jobs than the expected 190,000. The U.S. unemployment rate declined to 3.7 percent in November, down from the 3.9 percent reported in October. Next week, attention will shift to the December meeting of the Federal Open Markets Committee (FOMC). There is little to no chance the Fed will raise interest rates at this meeting, and analysts hope to gain further insight as to when interest rate cuts will begin.
USDA released the World Agricultural Supply and Demand Estimates (WASDE) Report on Friday, December 8. The futures activity section above does not discuss the market action covered in this section. Due to the importance of the report, we like to protect the data and its impacts on the market upon its release. For the U.S. side of the balance sheet, the headline number was the 310,000 bale reduction to the crop, bringing total U.S. production to 12.78 million bales. U.S. consumption decreased from 150,000 bales to 1.9 million bales. U.S. exports were unchanged at 12.2 million bales.
With the flow of changes, ending stocks decreased by 100,000 bales to 3.1 million bales. The big cut to overall production came from the Southwest. The Texas crop decreased by 500,000 bales to 3.1 million bales, Kansas decreased by 5,000 to 160,000 bales, and Oklahoma remained unchanged at 350,000 bales. The Pima estimate included brings the total Upland crop in the Southwest to 3.61 million bales and 3.645 million bales, respectively.
The reduction of the U.S. crop should have made for a more bullish report; however, a surprise cut to overall world consumption added pressure to the cotton market on Friday. World use was cut from 1.57 million bales to 113.73 million bales. This allowed for 900,000 bales to be added to world-ending stocks. Imports to China increased, which is typically a good sign for the U.S., but were offset by decreases in imports to Bangladesh, Pakistan, and Turkey.
U.S. export sales were down for the week ending November 30, falling below what is typically sold at this point in the season. A net total of 116,400 Upland bales and 3,200 Pima bales were booked for the week. Although the sales reported appear weak, the smaller crop size means the amount of sales the U.S. has been making recently has kept them on pace to reach the USDA export estimate. Shipments are a different story. The rate at which the U.S. has been shipping cotton is below where we need to be to reach the export estimate. This week’s report of shipments was no different than what has been reported most of this crop year. A total of 139,200 Upland bales and 4,000 Pima bales were shipped for the week. Cancellations were more prominent in this report. A total of 41,900 bales were canceled, with most reductions coming from Turkey, Mexico, and Honduras.
Now that the WASDE has been released, the market has new data to trade on for the coming month. Attention will be less divided and can revert to daily classing reports, receiving, and the weekly Export Sales report. With the FOMC meeting next week, outside markets will be monitored more closely than usual.
