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Friday, February 23, 2024

The United States plays a vital role in the global cotton market, acting as a key producer 

For the third straight week, the local cotton market’s official spot rate was unchanged, depicting low demand. The cotton rate in Sindh was Rs15500 per maund for the lower quality cotton. For top quality, the rate in Sindh was Rs17500.

The rate of Phutti differed widely within Punjab and Sindh. In Sindh, the Phutti rate ranged between Rs 5,500 and Rs 7,200 per 40 kg, while in Punjab, Phutti prices were between Rs 6,000 and 8,500 per 40 kg.

The Prices of lower quality cotton in Punjab ranged between Rs 16,000 per maund, and for top quality, the rate was Rs 17,800 per maund. In Balochistan, the prices were the lowest. Lower-quality cotton was Rs 14,500 per maund, and for superior-quality cotton, the price was Rs 17,000.

As per the latest market rates, the average Cotton price is ₹6580.75/Quintal. The lowest market price is ₹2104/Quintal. The costliest market price is ₹9571/Quintal. The retail price range for Brazilian cotton is between US$ 1.54 and US$ 1.63 per kilogram or between US$ 0.70 and US$ 0.74 per pound (lb). In 2023, Australia cotton’s approximate wholesale price range is between US$ 2.83 and US$ 6.09 per kilogram or between US$ 1.29. The retail price range for Bangladesh cotton is between US$ 0.92 and US$ 1.61 per kilogram or US$ 0.42 and US$ 0.73 per pound (lb).

Cotton grows in nearly all tropical and subtropical regions worldwide, primarily supporting the global textile mills and apparel manufacturing markets. The highly competitive prices of cotton fibers in the worldwide market and the increasing export demand for cotton yarn and textile products are expected to increase the global demand for cotton.

For instance, according to the Reserve Bank of India, in the fiscal year 2022, the value of cotton and cotton products exported from India was over INR 1140 billion (USD 13.94 billion). This increased by almost INR 586 billion (USD 5.1 billion) compared to the previous financial year, which accounted for INR 726 billion (USD 8.8 billion). Also, a greater crop yield in Brazil, Australia, and Pakistan will increase global cotton production and consumption during the forecast period.

Moreover, cotton is widely used to manufacture garments, apparel, and medical dressings. The abundance of natural fibers, especially cotton, in China, India, and the United States contributes significantly to the growth of the global textile market, which is expected to support the cotton market. For instance, according to METI, Japan’s consumption of knitted fabrics made from cotton in the textile industry increased by 139.3 thousand kilograms (+6.96%) since the previous year (2021). In total, the consumption quantity amounted to 2.1 thousand tonnes in 2021. This huge demand for cotton from various sectors across the globe is expected to boost the market at a faster pace.

The increasing applications and usage of cotton in various industries, including apparel manufacturing, home furnishings, and manufacturing of Industrial products, are driving the market’s growth. Medical gauze, cotton swabs, rounds, and traditional diapers are all made using cotton. In addition, cottonseed oil is derived from cotton plants and can be used for cooking, soap making, or cosmetics.

Owing to the increasing applications, the demand for cotton from many countries across the globe is increasing. For instance, according to the US Department of Agriculture (USDA), the United States was the leading exporter of cotton worldwide in 2021/2022. In that period, the US cotton industry had an export volume of about 3.2 million metric tons. Brazil accounted for the second largest exporting share, with an export volume of 1.72 million metric tons, followed by India and Australia.

Moreover, the United States plays a vital role in the global cotton market, acting as a key producer and exporter of fiber. The United States textile mills presently consume approximately 7.6 million bales of cotton annually. Eventually, about 57 percent of it is converted into apparel, more than a third into home furnishings, and the remainder into industrial products.

Cotton’s competitive share of US-produced textile end-uses shows a steady increase at approximately 34 percent. Hence, such increasing demand for cotton will eventually raise exports during the forecast period.

According to Cotton USA’s monthly report 23-24, World production is estimated at 112.9 million bales, 540,000 bales lower than the November estimate. In 23-24 United States, production is estimated at 12.8 million bales, 310,000 bales lower than the November estimate. In 23-24, China imports are estimated at 11.0 million bales, 500,000 bales higher than the November estimate. During the same period, Turkey’s mill use was estimated at 7.5 million, 400,000 bales lower than the November estimate. Bangladesh imports are estimated at 7.5 million bales, 200,000 bales lower than the November estimate. In Pakistan, 2023-24 production is estimated at 6.7 million, 200,000 bales higher than the November estimate.

In the United States, the March futures dipped below the 80.00 cent per pound mark last Friday and stayed below that level for the rest of the trading week. A lack of news on the cotton front kept prices trading on both sides of the market, with Tuesday being the only day prices settled to the upside. Technical stops were triggered, and demand questions continued the market’s bearish tone this week. Despite one of the better Export Sales Reports of the season, cotton prices continued to decline on Thursday. For the week, March futures settled at 79.13 cents per pound, down 168 points from the week prior. Certificated stocks are now at 3,267 bales, meaning 1,874 bales were decertified this past week. Daily volumes were light, and total open interest remained stable, decreasing 354 contracts to 196,442.

There was little to report in outside markets this week, which indicates the holiday season. The rally in the stock market paused briefly on Wednesday, and indexes suffered their worst daily loss in months. The loss did not continue, and the market rebounded to continue its upward tear to finish the week higher. The third quarter’s gross domestic product (GDP) was revised from a 5.2 percent annualized increase to 4.9 percent. The decline was more than expected but still the fastest pace of expansion in two years. After last week’s FOMC meeting, this week’s data reporting slower economic growth adds confidence that the Fed will be able to cut interest rates in 2024. The combination of weaker economic news and stock strength has pressured the U.S. Dollar over the past few weeks. Cotton has not been the only commodity struggling recently. Geopolitical tensions in the Middle East and supply worries allowed Crude Oil prices to recover some recent losses.

One of the better Export Sales Reports for the year did little to help boost the market on Thursday. The week reported new net sales of 146,700 Upland bales, up noticeably from the week prior. The biggest buyer for the week was China, booking 68,400 bales, followed by Vietnam with 45,100 Upland bales, South Korea with 19,600 bales, Guatemala with 9,600 bales, and Bangladesh with 7,500 bales. Cancellations were not as prevalent in this week’s report, but reductions of 18,900 bales were still reported. After months of subdued shipments, a marketing year high of 222,300 bales were exported for the week. Although still behind the pace needed to reach USDA’s export estimate, the bales shipped this week were on the higher end of what is typically exported at this point in the year. 5,300 Pima bales were sold, and 5,500 bales were shipped.

With news expected to be light where cotton fundamentals are concerned, outside markets will be a crucial watchpoint in the coming week. The weekly Export Sales Report will continue to be monitored by traders, but the outlook where demand is concerned remains the same. Rainfall has been received recently, and precipitation is forecasted in areas across the Southwest in the coming days. Still, El Nino may be more modest than initially hoped. As a reminder, next week will be a shortened trade week as we celebrate the Christmas holiday. The shorter week means the Export Sales Report will be delayed until Friday, December 29.

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