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All you need to know about cotton this week.

Textiles and Сomposites Raw materials market
The global cotton market remains uncertdue ton on doubts about the actual size of the crop. In the United States, the crop is under pressure due to weather, in India and Pakistan, the excellent crop has been threatened by various pest attacks at the flowering stage.

The global textile market seems to be rebounding. The perception is wrong as the orders snatched away from China are only up for grabs and the major candidates in this regard are Bangladesh and Vietnam. In Pakistan, it is for the first time in more than seven years that crop size as projected now will almost end the need for cotton import except long staple varieties. Cotton prices in India are dilly-dallyingstate-, state to a state basis. India is a big country and the crop has matured excellently in some areas while it remains under threat in other states that keep the cotton rate volatile.

In Pakistan the Karachi Cotton Association (KCA) on Thursday decreased the spot rate by Rs200 per maund to close at Rs 18,800 per maund. Bearish trends were witnessed in the local cotton market mainly because of lower prices. Otherwise, the trading volumes remained satisfactory. Cotton rates have declined from a peak of Rs2300 per maund to around Rs1800 per maund throughout the cotton markets in the country. In Sindh, the rate varied from Rs17,300 to Rs18,000 per maund. The rate of Phutti in Sindh ranged between Rs7500 to Rs8,000 per 40 kg. In Punjab, the cotton was quoted at Rs18,500 to R18,700 per maund while Phutti in Punjab was available between Rs 7,500 to Rs 8,500 per 40 kg. The rate of cotton in Balochistan was quoted at Rs17,700 to Rs18,000 per maund while the rate of Phutti ranged between Rs 7,500 to Rs 8,500 per 40 kg. Polyester Fiber was available at Rs 383 per kg.

On Thursday around, 1400 bales of Tando Adam, 2000 bales of Shahdad Pur, 2000 bales of Sanghar were sold at Rs 17,500 to Rs 18,500 per maund, 3000 bales of Salehpat, 2000 bales of Rohri were sold at Rs 18,300 to Rs 18,500 per maund, 400 bales of Dehrki were sold at Rs 19,300 per maund, 200 bales of Khair Pur were sold in between Rs 18,400 to Rs 18,700 per maund, 600 bales of Faqeer Wali, 600 bales of Hasil Pur, 400 bales of Dera Ghazi Khan, 600 bales of Ali Pur were sold at Rs 19,000 per maund, 1200 bales of Layyah, 800 bales of Mian Channu were sold at Rs 19,000 to Rs 19,200 per maund, 2200 bales of Chichawatni were sold at Rs 18,600 to Rs 19,000 per maund, 600 bales of Sadiqabad were sold at Rs 19,000 per maund, 600 bales of Bahawalpur were sold in between Rs 19,000 to Rs 19,100 per maund, 1600 bales of Chishtian were sold in between Rs 19,000 to Rs 19,300 per maund, 220 bales of Rahim Yar Khan were sold at Rs 19,000 to Rs 19,300 per maund, 200 bales of Donga Bonga were sold at Rs 19,200 per maund, 1200 bales of Fort Abbas were sold at Rs 19,100 to Rs 19,200 per maund, 800 bales of Gojra, 600 bales of Samunderi, were sold at Rs 18,500 per maund, 2800 bales of Vehari were sold at Rs 18,800 to Rs 19,250 per maund, 1800 bales of Yazman Mandi were sold in between Rs 19,000 to Rs 19,500 per maund, 2200 bales of Haroonabad were sold at Rs 19,000 to Rs 19,200 per maund and 3400 bales of Mian Wali were sold at Rs 19,200 to Rs 19,300 per maund.

Supported by favorable weather conditions, Pakistan’s cotton production spiked 80 percent to 3.93 million bales in the first two months of the current season, increasing the availability of the commodity to textile makers and cutting the nation’s import bill significantly during times when there is a foreign exchange reserves crisis in the country. The Pakistan Cotton Ginners Association (PCGA) reported on Monday that the commodity output had stood at 2.18 million bales this time last year. Experts said favorable weather conditions supported this high production.

Chairman of the All Pakistan Textile Mills Association (APTMA), Asif Inam, said, “Better cotton output has reduced the industry’s reliance on imported commodities this year compared to the previous year, saving precious foreign exchange reserves.” According to the Pakistan Bureau of Statistics (PBS), the country imported 683,911 tonnes of cotton worth $1.68 billion in the previous fiscal year, which ended on June 30, 2023.

Experts anticipate the country will produce 9-10 million bales this year compared to around five million last year, although Federal Commerce and Trade Minister Gohar Ejaz expects the country to harvest 12 million bales this year. The textile industry remains the single largest export-earning sector of Pakistan, attracting almost 60 percent of the total such earnings in a year.

According to the International Institute for Sustainable Development (IISD), the fashion industry uses around two-thirds of cotton fibers produced worldwide, giving it immense influence over the livelihoods of the 350 million people who work in the cotton supply chain. Some 250 million people work in cotton processing, while 100 million are farmers who grow cotton. The vast majority of these farmers grow their crops on fewer than two hectares of land and are located in developing countries, including 30 ranked by the United Nations as low in development. Experts say Pakistan has a high potential to increase cotton production significantly. However, the non-availability of quality seeds remains a chronic issue, limiting the output to current levels.

The data suggests Pakistan has taken some early production in Sindh this year, as they used early production seeds in the fields. Stakeholders have said that there is a pest attack in some cotton production areas. However, the farmers are taking remedies to lower the scale of losses. They estimated pest-related losses to the tune of around half a million bales, which is usual. They, however, hope the weather will remain supportive, as cotton remains a weather-sensitive crop, and variations in temperature and unwanted rain may damage a portion of the crop.

In the US only 29 percent of the Cotton Crop is rated good to excellent. December futures traded higher most of the week, getting a boost from outside markets and a supportive WASDE. Despite a delayed Export Sales report that contained poor sales, December futures went into the weekend with moderate gains. The WASDE release on Tuesday kept the market trading higher on Monday and Tuesday, but prices turned Wednesday due to a lack of buying, an increase in Reserve sales out of China, and rain received in West Texas. Macroeconomic influences took control to finish the week, and December futures settled at the higher end of the trading range. December futures finished at 87.80 cents per pound, up 242 points from the week prior. Total open interest flattened out this week, losing only 608 contracts to stand at 227,755.

There was a flurry of activity in both the cotton market and outside markets where important data releases were concerned. Major indexes found support at the end of the week to finish strong. The U.S. Consumer Price Index (CPI) for August reported the biggest gain in 2023, rising 0.6 percent month-over-month. The Producer Price Index (PPI) also rose more than expected, increasing 0.7 percent month-over-month, higher than the 0.4 percent expected by analysts. A higher-than-expected reading for U.S. retail sales helped boost the cotton market on Thursday. August retail sales rose 0.6 percent month-over-month, more than the expected 0.1%. Clothing sales specifically rose 0.9 percent in August. The labor market continues to show resilience with a smaller-than-expected 220,000 claims reported for U.S. initial unemployment this week. The U.S. Dollar reacted positively to the economic data by posting a 6-month high at the end of the week. Crude oil prices continue to march higher and post a 10-month high from worries of tighter stock and speculation of increased demand in China. The Federal Open Markets Committee (FOMC) meets on Tuesday and Wednesday next week. The strong economic data released all but cemented opinions that the Fed will hold interest rates at the upcoming meeting.

The World Agricultural Supply and Demand Estimates (WASDE) Report was released on Tuesday, September 12. As expected, USDA cut 2023/24 cotton production from 860,000 bales to 13.13 million bales. Exports were also lowered by 200,000 bales to 12.3 million bales. Ending stocks decreased by 100,000 bales to 3.0 million bales. Domestic consumption stayed the same at 2.15 million bales. One thing to note is that 2022/23 ending stocks were raised 550,000 bales; therefore, increasing 2023/24 beginning stocks 550,000 bales to 4.25 million bales. The overall production decrease was spread throughout many states, but the biggest cuts occurred in the Southeast region. The Southwest region also decreased overall, resulting from decreases in Oklahoma and Kansas. Upland production in Texas stayed the same at 4.2 million bales, but Oklahoma production was cut in half to 260,000 bales and Kansas production was lowered from 123,000 bales to 127,000 bales. The total production estimate for Upland cotton in the Southwest is now 4.587 million bales.

The global side of the balance sheet held minor, but notable changes. World production decreased from 1.73 million bales to 112.39 million bales. Almost a third of that decrease came from India, where production decreased by 500,000 bales. World consumption decreased by 1.06 million bales to 115.88 million bales. These changes brought world-ending stocks to 89.96 million bales, an overall reduction of 1.64 million bales.

The U.S. Export Sales Report for the week ending September 7 showed that demand for U.S. cotton remains tepid. A net total of 67,400 Upland bales were booked for the week, continuing to stay well below what is averaged at this point in the crop year. The biggest buyer of Upland cotton for the week was Vietnam, booking 25,900 bales, followed by Mexico with 25,200 bales, China with 17,500 bales, Bangladesh with 15,200 bales, and Indonesia with 6,100 bales. It should also be noted that a total of 29,800 Upland bales were canceled on this report. The majority of that reduction came from Turkey, where 25,300 bales were canceled. A disappointing 118,200 Upland bales were exported for the week, continuing to lag the pace that is typical at this point in the marketing year. A net total of 1,000 Pima bales were sold this week and 7,500 bales were exported.
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