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Wednesday, June 26, 2024

This week saw bustling activity in Pakistan’s cotton market

The cotton rates in Sindh were Rs 18,500 per maund for lower grade and Rs 20,500 for superior quality. The larger buyers preferred the commodity with lesser trash, readily paying higher prices.  In Punjab, the spinners paid Rs 18,500 per maund for lower quality and Rs 20,200 for better quality. Phutti prices continued to attract better rates that ranged from Rs 8,000 to Rs 9,200 per 40 kg. Surprisingly, the cotton rates in Balochistan remained subdued, although the province produces better quality cotton. The price range in Balochistan was recorded at Rs 17,500 to Rs 18,000 per maund.

On Thursday, some notable transactions were seen in the market. Two hundred bales of Deherki were sold at Rs 21,000 per maund (cond), 800 bales of Karoondi were sold at Rs 19,500 per maund, 1200 bales of Sadiqabad were sold at Rs 20,500 per maund, 1000 bales of Dera Ghazi Khan were sold at Rs 19,500 to Rs 20,000 per maund, 600 bales of Khan Pur were sold at Rs 20,000 per maund, 400 bales of Fort Abbas were sold at Rs 19,000 to Rs 19,700 per maund, and 800 bales of Haroonabad were sold at Rs 18,000 to Rs 19,000 per maund.

Meanwhile, business community members urged the government and the Ministry of National Food Security and Research to review procedural and regulation changes and allow the import of cotton in open trucks that will not only increase foreign exchange and textile export but also cut additional monetary burden on importers.

Traders said the government and authorities concerned had brought procedural changes about cotton import. Under the new regulation, the business community said importing cotton from Afghanistan has been made mandatory in containers.

However, the business community said traders and importers are facing hardships owing to the unavailability of containers to meet this condition.

Elsewhere in the world, the cotton of 29mm fetched ₹55,400 in India and is witnessing a declining trend of 0.36 percent. In China, the retail price range in the Yuan Renminbi for cotton is between CNY 5.33 and CNY 6.24 per kilogram or between CNY 2.42 and CNY 2.83 per pound(lb) in Beijing and Shanghai. The retail price range for Brazilian cotton is between US$ 1.56 and US$ 1.64 per kilogram or between US$ 0.71 and US$ 0.75 per pound(lb). The retail price range for Brazilian cotton is between US$ 1.56 and US$ 1.64 per kilogram or between US$ 0.71 and US$ 0.75 per pound(lb). The retail price range in Australian Dollars for cotton is between AUD 6.10 and AUD 13.10 per kilogram or between AUD 2.77 and AUD 5.94 per pound(lb) in Canberra.

The retail price range for Indonesian cotton is between US$ 0.87 and US$ 1.16 per kilogram or US$ 0.39 and US$ 0.52 per pound(lb). The retail price range for Bangladesh cotton is between US$ 0.92 and US$ 1.62 per kilogram or between US$ 0.42 and US$ 0.73 per pound(lb). The retail price range in Taka for cotton is between BDT 98.78 and BDT 173.90 per kilogram or between BDT 44.80 and BDT 78.87 per pound(lb) in Dhaka and Chittagong (Chattogram). The retail price range for Vietnam cotton is between US$ 1.43 and US$ 2.38 per kilogram or between US$ 0.65 and US$ 1.08 per pound(lb). The retail price range in Dong for cotton is between VND 35,771.25 and VND 59,618.75 per kilogram or between VND 16,222.79 and VND 27,037.98 per pound(lb) in Hanoi and Ho Chi Minh City.

In the United States, the stock market managed to recover losses by the end of the week. Moreover, the U.S. export sales report reveals phenomenal weekly sales and shipments.

 The story seems the same for this week as in previous weeks. Cotton futures traded on both sides of the market each day but made gains for three consecutive days to finish the week higher. Despite a cut to U.S. production, the WASDE release on Friday was overall bearish, causing prices to drop marginally lower going into the weekend. Upon opening, the market was closed for a federal holiday on Monday but continued in its recently typical sideways fashion. Prices finished next to unchanged on Tuesday, facing macro headwinds and a stronger dollar.

On Wednesday, encouraging retail sales data and potential speculative buying kept prices higher. Cotton futures finished the week making solid gains, finding support from more substantial crude prices and gains in the stock market. For the week, March futures finished at 82.51 cents per pound, up 115 points compared to the week prior. Total open interest remains strong, increasing 3,332 contracts to 208,270, remaining at the highest since November.

This week, attention seemed to be split between the attacks on ships in the Red Seas region, uncertainty concerning interest rates, and a potential government shutdown. Crude oil prices came under pressure when Houthis attacked ships in the Red Sea in response to the Israel-Hamas war. Prices recovered and closed sharply higher for the week on good U.S. economic data and news that supply should remain robust in the coming years.

Markets were cautious early in the week, thinking cuts to interest rates may not occur as early as anticipated and that some analysts exaggerated how many cuts would be made in 2024. Economic news released later in the week combatted those fears, and markets managed to recover the losses from earlier. U.S. retail sales rose 0.6 percent for December, showing the consumer is still spending with higher inflation and helping boost the cotton market on Wednesday. On Thursday, U.S. initial jobless claims fell to the lowest level since September 2022, and housing data was stronger than expected, helping markets finish strong for the week. Lastly, Congress cleared a last-minute stopgap bill to avoid a government shutdown and narrowly extend funding until March.

The U.S. Export Sales Report for the week held phenomenal sales and shipments. The massive sales and shipments caused the market to make substantial gains. The report was delayed due to Monday’s federal holiday, so the market action due to the report is not covered in the Futures Market Activity section. 420,000 Upland bales were sold, and a marketing year high of 257,700 bales were shipped. A good diversification of countries bought cotton for the week, proving the rumors of a slight uptick in demand to be true. China was the biggest buyer for the week, booking 227,700 bales, followed by Vietnam with 38,900 bales, Pakistan with 37,300 bales, India with 21,000 bales, and Turkey with 13,700 bales. Shipments were healthy, and that number should be stable now that we are in peak shipping season. A net total of 3,500 Pima bales were sold, and 4,600 bales were shipped.

Much of the U.S. was hit with an arctic blast this past week, causing temperatures to drop significantly and snow to fall in places throughout the country. The market will return to normal next week, and scheduled report releases will continue. Although cotton has been range-bound and traded sideways, it has recently performed well compared to other commodities. Crop competition for next year’s acreage will be monitored in the background, but weekly Export Sales Reports will be key focal points until the early production estimates for the 2024/25 season start to flow.

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