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All you need to know about cotton this week.

Textile Raw materials market
Pakistan’s cotton market remained stable but the trading volume remained low. The cotton rate in Sindh ranged between Rs17000 to Rs20000 per 37.324 kg. The rate of cotton in Punjab is between Rs18000 to Rs21000 per 37.324 kg.

The rate of Phutti in Sindh varied from Rs5500 to Rs8300 per 40 kg. The rate of Phutti in Punjab ranged between Rs 6,000 to Rs 8,500 per 40 kg. Around 200 bales of Haroonabad were sold at Rs20500 per 37.324 kg. The Spot Rate remained unchanged at Rs20000 per 37.324 kg. Polyester Fiber was available at Rs 375 per kg.

This month is very important regarding cotton cultivation in Punjab where sowing is still ongoing. All the concerned departments including field teams are working side by side with the farmers in implementing the cotton rehabilitation program.

Government officials expressed these views while reviewing ongoing activities in Sargodha Division related to Cotton Action Plan 2023-24 in Commissioner Office Sargodha. Director Agriculture (Extension) Sargodha Shahid Hussain, while giving a briefing on the cotton action plan, told the participants that this year, Sargodha Division has set a target of 0.180 million acres of cotton cultivation, of which till today, about 0.133 million areas have been brought under cotton cultivation.

Punjab Agriculture Secretary Iftikhar Ali Sahoo said that the Sargodha division has achieved the target of cotton cultivation up to 73 percent which is commendable. The next few weeks are very important for cotton cultivation.

During the meeting, the Secretary of Agriculture, Punjab took notice of the power outage in Mianwali district and directed the concerned authorities to ensure the supply of electricity for agricultural purposes during cotton cultivation.

In the first quarter, cotton had been consolidating around the 80 cents level since reaching a low of 70.21 cents in October 2022, less than half the price at the March 2022 high. Cotton futures for July delivery have not moved much since the end of Q1 2023, as the price hovers around the 80 cents per pound pivot point.

The three factors that should keep prices stable around the 80 cents per pound level include the fact that cotton is sitting around the long-term average price dating back over a half-century. The 80 cents per pound level is the cotton future’s pivot point.

Input prices have increased as inflation is at the highest level in decades. However, the decline from the May 2022 high has drained the bullish sentiment from the soft commodity.

The overall commodities asset class remains in a bullish trend. Goldman Sachs analysts have called for a “commodities supercycle” over the coming years. The forecasts cited “underinvestment” in raw material production as the reason for higher future prices. While cotton is unlikely to experience a significant rally in 2023, the overall bullish sentiment in the asset class should keep prices stable around the current price level.

With the US economy showing signs of cooling, cotton prices finished the week at the lower end of the long-term trading range. US export sales and shipments remained strong during the past week.

After two days of solid gains, cotton prices slid back to the lower end of the long-term trading range. Demand in the cotton market seemingly returned early in the week, which helped push prices as high as 83.90 cents per pound. A flurry of activity in both the cotton market and outside marketskept traders on alert. Inflation news, rain received in West Texas, and the anticipation of the WASDE report ultimately added pressure to cotton prices. July futures fell 214 points to settle at 79.62 cents per pound. Volume continues to remain low, and total open interest decreased by 1,218 contracts to finish at 177,440.

The release of April’s Consumer Price Index (CPI) was the headline of the week for outside markets. CPI came in as expected, with a 0.4 percent increase reported month-over-month and a slightly cooler-than-expected increase of 4.9 percent year-over-year. The April jobs report showed that 253,000 jobs were added in the month, an indicator that the labor market is showing resilience despite the efforts to cool the economy. U.S. initial jobless claims rose to 264,000, which is the highest level reached in over a year. The number of jobless claims is still historically low, but the marginal increases that have occurred in the past few weeks suggest that the labor market is starting to crack. U.S. Producer Price Index (PPI) signaled that prices are easing as well, with PPI increasing 2.3 percent when compared to last year. Although the job market is still hot, much of the data released this week indicates that the economy is starting to cool off and that the Fed has a better chance of pausing interest rate increases at their next meeting. The Dollar finished the week on a high note, with weakness in stocks and turmoil in the banking sector helping it find support. Crude oil came off the sharp losses seen last week, but the stronger Dollar and demand concerns caused it to be pressured to finish the week.

The week marked another week of strong sales and shipments of U.S. cotton, although the market’s reaction would say otherwise. The U.S. Export Sales report had strong net sales of 246,800 Upland bales for the 2022/23 marketing year, and 12,800 bales for the 2023/24 marketing year. The biggest buyer for the week was China, with 106,200 bales purchased, followed by Vietnam with 67,100 bales, Bangladesh with 36,000 bales, and Turkey with 17,600 bales. Shipments also continued at a strong pace. A total of 331,000 bales were exported for the week, which is far above the pace needed to reach USDA’s export estimate. Pima sales were down when compared to recent weeks, but a net total of 15,200 bales were still purchased for the week. A total of 20,300 Pima bales were exported, showing another solid week of shipments.

The May WASDE report gave traders the first glance at what the base case scenario will be for the 2023/24 marketing year and updated the 2022/23 balance sheet. For 2022/23, U.S. production was cut 210,000 bales to 14.47 million bales. This production cut was widely anticipated, as many have said that USDA had the crop in the U.S. too high all season. An upward revision to exports was also expected, but the 400,000-bale increase to 12.6 million bales came as a bullish surprise. In turn, these revisions decreased U.S. ending stocks to 3.5 million bales. The global side of the balance sheet showed a marginal decrease of 54,000 bales in consumption to 109.63 million bales. World ending stocks were raised 62,000 bales to 92.63 million bales.

The 2023/24 U.S. crop is expected to be 15.5 million bales and exports were set to 13.5 million bales. Ending stocks are expected to be 3.3 million bales, meaning the outlook for U.S. stocks remains tight. The world balance sheet showed that USDA expects global consumption to increase to 116.23 million bales. Production is expected to decline slightly to 115.69 million bales and ending stocks are also expected to decrease to 92.28. This week’s Crop Progress report shows that Texas has planted 23 percent of the expected cotton acreage, which is right in line with the five-year average of 22 percent. The U.S. is also staying on pace, and a total of 22 percent of the expected acreage has been planted in the country. West Texas and Oklahoma received spotty rains this past week, and there is more forecast over the weekend. The rains have been welcomed, but above-average temperatures have also been present, increasing the soil evaporation rate. The forecasted precipitation over the weekend gives hope that these areas will be able to plant promptly. South Texas, on the other hand, has received more than adequate moisture recently. Warmer temperatures and open skies are needed in the coming weeks to aid in the crop’s development.
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