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All you need to know about cotton this week.

Raw materials market Textile
Cotton Prices globally struggled before be bounding with modest gains to finish the week. In Pakistan however, the local cotton market on Thursday remained steady with low trading volume.

The cotton rates in Sindh fluctuated from Rs17000 to Rs20000 per 37.324 kg. In Punjab, the rates were 5 to 10 percent higher ranging between Rs18000 to Rs21000 per 37.324 kg. The rate of Phutti in Sindh was quoted at Rs5500 to Rs8300 per 40 kg. The rate of Phutti in Punjab ranged between Rs6000 to Rs8500 per 40 kg. The Spot Rate at Karachi Cotton Exchange remained unchanged at R20000 per 37.324 kg. Polyester Fiber was available at Rs375 per kg.

Cotton production in top grower China could decline this year after frigid weather delayed sowing and hurt plants in some areas, and acreage dropped as some farmers followed government advice and switched to grain.

The harvest may fall by as much as 1 million tons from last year, according to Guo Chao, the general manager of Hebei Xingyu Textile Material Co., a major cotton trader and processor. If realized, that would represent a decline of more than 15 percent from the production of about 6 million tons in 2022.

China is the world’s biggest textile producer and one of the largest cotton importers. Any shortfall in production could potentially boost purchases of foreign cotton, but that may be countered by a lackluster outlook for demand as exporters of textile products grapple with a slowing global economy.

Unseasonably cold weather damaged the cotton crop in the main producing region of Xinjiang, just as local governments were encouraging farmers to switch to growing grains under a nationwide drive to bolster food security. Cotton farmers in some areas were told to plant grain on as much as 10 percent of their land, according to Mysteel, a commodity consultancy in China, and the company is predicting a 10 percent drop in cotton acreage from last year.

Still, the crop has time to recover. Sunnier and warmer conditions this week may improve the outlook, though the long-term market trend is firm, Guo said at a conference Friday. Planting normally starts at the beginning of April, and according to state television, almost 90% of the Xinjiang crop has been sown.

Extreme weather from drought to cold in the past few weeks has roiled everything from apples to rubber and cotton in China. Temperatures were so low in the cotton areas that emerging crops were damaged, and hailstorms only worsened the impact, traders and analysts said.

Experts estimate marketing year (MY) 2023/24 India cotton production at 25.5 million 480 lb. bales on 12.4 million hectares are planted, a decrease from the previous year due to the expectation that farmers will shift cotton acreage to higher return crops such as oilseeds and pulses. However, yields are expected to recover as farmers will plant shorter-duration early maturation varieties. Mill consumption is estimated at 23.5 million 480 lb. bales, as yarn and textile demand weakens in major international markets. Higher exportable supplies, at 2.8 million 480 lb. bales, indicate that export prospects are better than last year, while imports will reduce significantly due to tighter global supplies.

In the United States cotton prices struggled this week before rebounding to finish modest gains. The cotton market was on the defensive this week, with the Fed’s rate decision and precipitation received in West Texas pressuring prices early on. The macro headwinds caused July futures to drop below 80 cents on Wednesday, but a strong Export Sales Report sent July futures up the limit on Thursday. July futures settled at 81.76 cents per pound, up 136 points for the week. Although volume remained low, traders were able to add 4,797 contracts to bring total open interest to 176,222.

Outside markets had a busy week with economic news, global economic news, and debt ceiling worries. Major indexes were strong going into the weekend, finishing the month of April with the second straight month of gains. The release of China’s Producer Manufacturing Index was surprisingly lower, signaling the country’s economy might be struggling more than has been hinted at since reopening from Covid lockdowns. The beginning of the week was pretty quiet, with many holding out to see what the Fed would decide at the Federal Open Market Committee (FOMC) meeting this week. Interest rates were raised for the tenth time in a row on Wednesday. As expected, a 25-basis-point increase was announced, and the overall rate rose to 5.0 percent. This has been the fastest increase in interest rates seen in over 40 years and the highest that rates have been in 16 years. Although the Fed said a pause was possible, they will still be data-driven when making future decisions, which ultimately weighed on markets. U.S. initial jobless claims rose to 242,000, showing a weaker-than-expected labor market. The Dollar was pressured by the bearish economic news this week but recovered some of its losses to finish with marginal gains. Unlike cotton, the strong dollar and geopolitical worries caused crude oil to fall sharply this week.

Demand for U.S. cotton remains strong. The U.S. Export Sales report held net sales of 231,300 Upland bales for the 2022/23 crop year and 26,900 bales for the 2023/24 marketing year. The biggest buyer for the week was China, with 117,100 bales purchased, followed by Vietnam with 43,500 bales, Turkey with 34,800 bales, Bangladesh with 17,100 bales, and Nicaragua with 8,800 bales. There were a total of 25,200 cancellations contained in this report, but the majority of the cancellations were rolled as sales to the next marketing year.

Shipments continue to stay above the pace needed to meet the USDA export estimate of 12.2 million bales. A total of 414,000 bales were exported for the week. Pima continues to show improvement in sales and shipments. A net total of 24,600 Pima bales were sold and 24,800 bales were exported.

Timely rains were received in parts of West Texas, Oklahoma, and Kansas over the past week. Although the rain was needed, much more moisture is required in the area to help with the planting and development of the crop. Planting has slowly started in the Panhandle and parts of West Texas. Above-average temperatures are expected in the coming week, which will keep soil moisture levels low from evaporation rates and hinder planting as the time approaches. South Texas has continued to receive rain, along with cooler temperatures. Open skies and warm weather would be welcomed in the coming days to aid in the crop’s development. This week’s Crop Progress report showed that planting is slightly ahead of schedule in Texas, with 20 percent of the expected acreage now planted, which is right above the five-year average of 17 percent.

With the World Agricultural Supply and Demand Estimates (WASDE) coming out next Friday, next week will be a big week for cotton. The May report not only updates the 2022/23 balance sheet but will give the first full forecast for the 2023/24 season. Traders have been wondering all year what USDA will report as the final U.S. production number.
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