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All you want to know about cotton this week.

Raw materials market Textile
Trading volume remained very low in cotton markets in Karachi and Lahore. Rates remained stable but were under stress due to low buying. Spinning mills are withholding purchases being unable to operate because of the withdrawal of power and gas subsidies.

Cotton rates in Sindh were quoted at Rs17000 to 19000 per 37.5 kg. In Punjab, the rates fluctuate between Rs. 18000 to Rs19000 per 37.5 kg. The rate of Phutti in Sindh ranged from Rs5500 to Rs8300 per 40 kg while it was available in Punjab at Rs6000 to Rs8500 per 40 kg. The Phutti rates remained generally lower than the government fixed price of Rs8500 per 37.5 kg. The ginners are reluctant to buy Phutti because of the inability to sell ginned cotton to the spinners.

There were no significant sales that could be reported. Only 400 bales of Shujabad were sold at Rs 19,000 per 37.5 kg on Thursday. Polyester Fiber was available at Rs 358 per kg. Despite import restrictions, Pakistani spinners are still booking more cotton from the US than they are buying locally.

The current situation is temporary as the actual cotton consumption in Pakistan is three times higher than Pakistan’s cotton production. Punjab Governor Muhammad Baligh-ur-Rehman taking note of the situation formed a sub-committee on cotton seed that submitted its report last week. The governor of Punjab on this occasion said that the revival and development of valuable cotton crops was the need of the hour. He said cotton plays a vital role in achieving more than 60 percent foreign exchange annually from the export of textile Products.

He regretted that the fluctuation in cotton output has been mainly because of the non-availability of quality cotton seeds. He said that during the last decade, we achieved a record yield of 1.44 crore bales, while presently we are achieving only 50 to 55 lakh bales.

He said this 3-time decrease in the yield of the Cotton crop has badly affected the National Economy. The Governor also regretted the non-payment of Cotton Cess by APTMA which was badly affecting the performance of Cotton Research Institutes.

Meanwhile, in the global market, cotton futures struggled to find support. The global financial markets also had another volatile week. The turmoil started last month when a bank in the US Silicon Market caved in. The cotton exports remained strong in the United States and did not lift the cotton rates.

Cotton futures struggled to find support this week while outside markets continued to weigh on prices. May futures dropped below 80.00 cents per pound last week and were unsuccessful when trying to break out of the upper-70s trading range at present. Futures failed to be moved by anything fundamental and followed the volatile outside market. Despite a strong Export Sales Report, May futures closed at 77.58 cents per pound for the week ending March 23, down 158 points from the week prior. Total open interest reached the highest level since early February, increasing 6,415 contracts to finish at 197,090.

Financial and commodity markets have witnessed a volatile month and this week was no exception to the sharp moves. The Federal Open Market Committee met this week and the rate hikes continued. As expected, interest rates were increased 25 basis points. The comments after, however, had the Fed keeping a hawkish stance where continuing rate hikes are concerned, with the target interest rate now being 5 percent. The Fed will be making rate decisions meeting by meeting in the coming months, with cuts not expected before the end of the year.The US interest rates impact the global financial markets.

The turmoil in the banking industry did have the Fed considering a pause in rate hikes, but the recent strong economic data prevailed and prompted the increase. Strong economic data is still being reported each week. Initial unemployment claims fell to 191,000, showing continued strength in the labor market. U.S. existing home sales surged unexpectedly in February, jumping 14.5 percent for the month, but still down compared to the same time last year. Equities had a rollercoaster week but recovered some losses to finish higher after Wednesday’s drop. The U.S. dollar struggled this week, hitting a 6-week low at one point, before recovering to finish the week. The weaker dollar helped boost commodities early on before the improvement at the end of the week added pressure.

Despite the volatile market conditions seen in previous weeks, demand for cotton was healthy for the week. The market, however, seemed to reject the strong report for the second week in a row. U.S. shippers sold a net of 310,200 Upland bales for the 2022/23 marketing year and 21,300 for the 2023/24 season. Sales to a variety of countries were made and the biggest buyer for the week was Vietnam, purchasing 115,300 bales. China was close behind, booking 95,900 bales, followed by Turkey with 25,100 bales, and Pakistan with 15,700 bales.

Shipments are slightly above the weekly pace needed to reach USDA’s export target, with 272,500 bales of cotton shipped. Pima sales showed substantial improvement with a net total of 16,900 bales reported, reaching a marketing year high. Shipments were also up, with a total of 7,100 bales exported for the week.

As reported last week, little has changed where drought is concerned throughout parts of Texas, Oklahoma, and Kansas. Temperatures will continue to fluctuate between above-average and cooler, with no substantial moisture in the forecast. Rain is needed across West Texas in the coming weeks to ease the droughty soils to prepare for the upcoming season. Planting is progressing steadily across South Texas. Unlike West Texas, South Texas has received a little rain in the past week, which paused planting in some areas. Warm weather will be welcome, but more moisture will also be needed now that planting is underway.
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