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All you need to know about cotton this week.

Textile Raw materials market
Cotton prices continued to decline in Pakistan as the Spot Rate Committee of the Karachi Cotton Association (KCA) decreased the spot rate by Rs200 per maund to Rs17500 per maund. The local cotton market generally remained bearish as far as prices are concerned the trading volume remained satisfactory.

In Sindh, the cotton prices slipped during the week to Rs16000 per maund with a maximum of Rs17000 per maund. The rate of Phutti also slipped much below the government support price ranging from Rs6500 to Rs7500 per 40 kg. The rate of cotton in Punjab was higher as it ranged between Rs16500 to Rs17200 per maund. However, the rate of Phutti in Punjab remained the same as in Sindh ranging from Rs 6,500 to Rs 7,500 per 40 kg. The rate of cotton in Balochistan ranged from Rs 16,500 to Rs 16,700 per maund while the rate of Phutti was better at Rs 7,000 to Rs 8,200 per 40 kg.

On Thursday,1200 bales of Dherki were sold at Rs 18,100 to Rs 18,200 per maund, 1800 bales of Saleh Pat were sold at Rs 17,000 to Rs 17,600 per maund, 400 bales of Sui Gas were sold at Rs 17,000 per maund, 600 bales of Mir Pur Khas were sold at Rs 15,500 per maund, 1200 bales of Mehrab Pur were sold at Rs 17,300 to Rs 17,400 per maund, 1200 bales of Tando Adam were sold at Rs 16,800 to Rs 17,000 per maund, 600 bales of Rohri were sold at Rs 17,000 per maund, 1600 bales of Khair Pur were sold at Rs 17,000 to Rs 17,600 per maund, 1000 bales of Rahim Yar Khan, 600 bales of Sadiqabad, 600 bales of Khan Pur were sold at Rs 17,800 per maund, 200 bales of Samundri were sold at Rs 16,500 per maund, 600 bales of Faqeer Wali were sold at Rs 17,800 per maund, 800 bales of Fort Abbas were sold at Rs 17,500 to Rs 18,000 per maund, 4800 bales of Mian Wali were sold at Rs 17,500 to Rs 17,900 per maund, 600 bales of Chistian were sold at Rs 17,500 to Rs 17,650 per maund, 400 bales of Tunsa Shareef were sold at Rs 17,500 to Rs 17,800 per maund, 400 bales of Bhakhar were sold at Rs 17,500 per maund, 1800 bales of Layyah were sold at Rs 17,500 to Rs 17,800 per maund, 200 bales of Donga Bonga were sold at Rs 17,800 per maund, 2800 bales of Yazman Mandi, 2400 bales of Haroonabad were sold at Rs 17,500 to Rs 17,800 per maund and 800 bales of Shujabad were sold at Rs 17,600 to Rs 18,000 per maund.

Amid reports that ginners are resorting to under-reporting the arrival of raw cotton to save taxes as well as underpay the growers, the Punjab agriculture authorities have decided to record the crop production on their own and field the Trading Corporation of Pakistan (TCP) as a player in the cotton market. So far, cotton arrival in the ginning factories in the province has been 100 percent more than the figures from last year.

Last year, Pakistan saw its lowest-ever output for cotton when the country produced only 4.8 million bales of cotton. The expectations this year were high. Cotton generally has fallen out of favor but weather patterns this year it seemed the weather would permit a higher yield

US Cotton was facing the same issues as Pakistan — high temperatures and drought in Texas, where 40 percent of US cotton production occurs, have slashed production and exportable supplies. As a result global trade is down by nearly a million bales from the previous month’s forecast.

There was a brief moment of worry when the cotton crop in Punjab faced an onslaught from whiteflies, which proved to be a nightmare for growers and agriculture department high-ups giving them sleepless nights. However, the government of Punjab to their credit swooped in with efficiency and used helicopters. For the control of whitefly infestation in the cotton belt in south Punjab, quality pesticides were sprayed with the help of drones and helicopters provided by the army on an area of 80,000 acres. The massive pest management campaign and change in weather had a positive impact on the standing cotton crop. As of September 30, 2023, the nation witnessed an astounding achievement with cotton arrivals surpassing the 5 million bales mark, reflecting an impressive year-on-year growth rate of 71 percent. This remarkable growth showcases the dedication and hard work of our farmers and the resilience of our cotton industry.

This year’s good fortune does not solve the larger issue. Years when things fall in place will come and go. A similarly good year had also come back in 2021-22. Back then the cotton crop that was sown in Pakistan in 2021 and was harvested in 2022 benefited from a peculiarity of international trade caused by Covid-19 that resulted in a bumper crop of cotton.

As the core issues of the cotton crop remain unaddressed, farmers will continue to abandon this crop and instead grow richer products such as sugarcane which are short-term cash crops but bad for agriculture and the climate in the long run.

India is a big country. Cotton is cultivated in many Indian states that differ in weather. This is the reason that crop production varies in different states. Unseasonal rainfall, pink bollworm infestation, and weak demand from the textile industry are some of the challenges facing farmers this year.

In Telangana, farmers say the production is expected to be better than last year. However, the Haryana cotton crop is said to be affected by pink bollworm infestation. Deficit rainfall is expected to impact production in Karnataka. The feedback is mixed in Maharashtra and Gujarat, with reports of extreme dry weather affecting crops in some areas while the production may be good in others.

According to Cotton Corporation of India (CCI) Chairman and Managing Director L. K. Gupta in Haryana and Punjab, there is an infestation (of pink bollworms). We are ascertaining (the infestation) in other areas. The arrival today is 25,000 bales from the Northern belt. The quality is slightly poor because of infestation.

While excess rain affected the crop in Madhya Pradesh, dry weather had an impact in Karnataka. “The next 10-15 days is crucial for the crop, experts pointed out.

Extreme weather led to the drying of crops in central parts of Maharashtra and Gujarat. This can result in a 20 percent loss in production…There was excess plantation and the impact will even out production. The actual picture will be available by the end of October.

Nishanth A. Asher, secretary of the Indian Cotton Federation, and Nikhil Choudhary, a ginner from Malkapur in Maharashtra, said the overall cotton situation was good at present. Production may be slightly lower than last year and prices are likely to remain the same as last season.

In the United States, December futures seemed to disregard the fundamentals of the cotton market this week and instead rallied on speculative buying and outside markets. Futures traded on both sides of the market throughout the week but settled higher for four of the five trading sessions. The impending government shutdown and upcoming Chinese holiday helped December futures reach 89.89 cents per pound on Thursday, but prices ran into resistance at that level. December futures came off their highs and eventually settled in the middle of the daily trading range.

Despite a poor Export Sales Report, December futures managed to finish last week at 88.71 cents per pound, up 224 points from the week prior. The certificatedby stock increased 14,641 bales to reach 35,126 bales, which is the highest level since October 2021. Total open interest continued to rise as well, reaching its highest level since November 2022, and increased 5,356 contracts to finish at 240,323.

Outside markets had a lot to do with cotton’s performance this week and major indexes were mixed from a looming government shutdown, a strong U.S. Dollar, and higher energy prices. It seems inevitable that the government will shut down, as talks attempting to find a resolution have appeared futile. Crude oil also reached a 13-month high, which provided an added boost to the cotton market as well. Oil prices found support from supply worries on both the domestic and international fronts. The U.S. Dollar reached an almost 10-month high, rallying on stronger bonds and mixed stocks early in the week. Typically, a strong Dollar puts a headwind on commodities, but we were in a unique situation this week where cotton was seemingly unaffected. U.S. initial jobless claims came in lower than expectations at 204,000, showing a resilient labor market.

Despite continuing poor demand, the market chose to ignore another week of disappointing export sales. Last week a net total of 55,300 Upland bales were booked, far below average for this point in the marketing year. The biggest buyer of Upland cotton for the week was Vietnam, booking 15,700 bales, followed by China with 13,100 bales, Indonesia with 5,400 bales, El Salvador with 4,000 bales, and Macau with 3,500 bales. Shipments were also below the pace needed to reach the USDA estimate of 12.3 million bales, with 159,400 bales exported. Sales of Pima cotton were reported to be a marketing year high. A net total of 15,600 Pima bales were booked and 2,100 bales shipped for the week.

As of September 24, 13 percent of the U.S. crop has already been harvested, right in line with the 5-year average pace. Crop conditions improved slightly this week, with 30 percent of the crop across the Cotton Belt rated good to excellent. Unseasonably hot temperatures were present across much of the Southwest this past week. The week to come will bring scattered storms and slightly cooler temperatures early in the week. Drier weather later in the forecast should give growers a chance to begin preparing earlier planted fields for harvest. Clear, dry weather would be welcome from here forward to help harvest proceed in a timely fashion.

While we usually mention that traders will need to continue to monitor the typical report releases, the impending government shutdown could potentially delay those releases. Weather will continue to be watched closely as well, as potential disturbances are developing in the Atlantic. With Chinese markets closed next week for holidays, there is one less source of information for cotton’s value. Although Chinese markets will be closed, it was announced that the Chinese Reserve auction is set to continue during the Mid-Autumn Festival next week.
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