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All you need to know about cotton this week.

Textile Raw materials market
The Spot Rate Committee of the Karachi Cotton Association (KCA) decreased the spot rate for the second successive week by Rs 3,00 per 37.324 kg bringing down cotton rates below Rs2000 to Rs 18,700 per 37.324 kg.

The decline in spot rates indicates that the local cotton market remained bearish However, the trading volume remained satisfactory. The rate of new crops of cotton in Sindh ranges between Rs 18,300 to Rs 18,600 per 37.324 kg. The rate of Phutti in Sindh dropped to between Rs 7,200 to Rs 8,000 per 40 kg. The rate of cotton in Punjab was a little higher at Rs 19,500 to Rs 19,700 per maund while the rate of Phutti was also quoted above the government’s minimum rate of Rs8500 per 40 kg at Rs 8,800 to Rs 9,500 per 40 kg.

Around, 4600 bales of Tando Adam were sold at Rs 18,500 to Rs 18,800 per 37.324 kg, 200 bales of Khando were sold at Rs 18,500 per 37.324 kg, 600 bales of Khadro were sold at Rs 18,500 to Rs 18,700 per 37.324 kg, 400 bales of Shah Pur Chakar were sold at Rs 18,500 to Rs 18,700 per 37.324 kg, 600 bales of Mir Pur Khas were sold at Rs 18,500 to Rs 18,800 per 37.324 kg, 1600 bales of Sanghar were sold at Rs 18,500 to Rs 18,800 per 37.324 kg, 100 bales of Chichawatni were sold at Rs 19,700 per 37.324 kg, 200 bales of Hasil Pur, 200 bales of Khanewal were sold at Rs 19,600 per 37.324 kg. Polyester Fiber was available at Rs 355 per kg.

The NGOs working on the sustainable cultivation of cotton are now focusing on Africa where cotton production is on the rise. After a long hiatus due to the pandemic, a regional workshop for all Cotton Made in Africa (CmiA) partners in West and Central Africa was held recently. This year’s workshop was held in Lomé, the capital of Togo.

Because the previous regional workshop was over three years ago, this year’s event was extended to take place over three days. Two representatives from each cotton company were invited. There were also two participants from Germany: Alexandra Perschau, head of the standards & outreach department, and Elena Wahrenberg, CmiA verification manager. They were joined by the CmiA representative and advisor for the west and Central Africa, Younoussa Imorou Ali, coming from Benin.

The workshop with 30 participants also featured presentations and discussions on the many successful CmiA community projects undertaken, how they came to be, and the many different directions that project ideas could take.

In the United States cotton prices moved in a choppy fashion to the lower end of long-term trading. US export sales and shipments were dismal in the past week.

The cotton market continued to trade in a choppy, two-sided pattern throughout the week. Last Friday’s release of the World Agricultural Supply and Demand Estimates (WASDE) report did little to move the market, as many of the changes made were expected. Weather, questions about weakening demand, and larger crops from Brazil and Australia added pressure to cotton prices throughout the week. News in outside markets provided little support to the futures market. Both the July and December contracts traded lower each day since the close last Thursday. The July contract settled at 80.64 cents per pound, down 367 points. December futures fell below 80 cents again and eventually settled at 79.60 cents per pound, down 203 points from the week prior. Total open interest fell substantially from last week, with much of the decline coming from the July contract. A decrease of 20,664 contracts brought total open interest to 169,708.

The Federal Open Markets Committee (FOMC) met this week and, as anticipated, interest rate levels were held steady. The Fed left the door open to future raises in interest rates and said cuts to rates are not likely to occur until 2024 when prices are further stabilized. The projected peak interest rate is now expected to be higher than the initial 5.1 percent. This was, however, the first pause seen since the Fed started raising interest rates 15 months ago. The Consumer Price Index (CPI) and Producer Price Index (PPI) were also released this week. The CPI showed a 4.0 percent month-over-month increase, which was lower than market expectations. The PPI also showed a 1.1 percent year-over-year gain, which is the smallest gain seen in over two years. The only surprise raise this week came from U.S. retail sales, which increased 0.3 percent month-over-month as opposed to market expectations of a 0.2 percent decline. U.S. initial jobless unemployment claims were reported at 262,000, unchanged from last week and remaining at the highest level in 19 months. While major indexes rallied on this data, the Dollar lost ground towards the end of the week.

Export sales were dismal for the week. A net total of 98,900 Upland bales were sold for the 2022/23 crop year. China, once again, held the majority of sales for the week, booking a total of 70,500 bales. This was followed by Bangladesh with 11,700 bales, Vietnam with 9,900 bales, Indonesia with 4,500 bales, and Taiwan with 2,900 bales. Demand for new crops continues to be negligible for what is typical at this point in the year. A net total of 65,700 bales were booked for the 2023/24 crop year. Shipments slowed as well, with a total of 244,800 bales exported for the week. This is below the pace needed to meet the new USDA export estimate of 13.0 million bales. Sales and shipments of Pima were down compared to recent weeks. A net total of 2,000 Pima bales were sold and 300 bales were exported for the week.

West Texas saw a bit of relief from the recent rains, which is beneficial as many producers still had cotton to get in the ground. Above-average temperatures are expected in the coming week, which will help spur growth in the recently planted crop. Unfortunately, the Panhandle of Texas has not fared as well. An excessive amount of rain and severe storms have greatly impacted the cotton acres that were expected in that area. The South Texas crop is maturing quickly, but excessive heat is now becoming a concern. Kansas and Oklahoma have slowly started to pull out of droughty conditions and the crop is starting to progress. The U.S. is still slightly behind in planting with 81 percent of the expected crop planted, which is behind the 5-year average of 86 percent. For the Southwest, 72 percent of the expected Texas crop, 93 percent of the Kansas crop, and 66 percent of the Oklahoma crop have been planted. Crop conditions in the U.S. have declined slightly from the week prior.

With the WASDE report and FOMC rate decision behind us, attention will shift back to the fundamentals. First Notice Day begins on June 24, and while many traders have already wrapped up their old crop positions, activity will still be present. Markets will be closed on Monday, delaying many reports for the week.
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