Our news

today's current events
Please subscribe to our newsletter to keep abreast of the latest news from our company

© All Right Reserved. UAB «TERMO PARTNERS»
e-mail us: info.termo.partners@gmail.com
Social network: Facebook | Linkedin | Youtube
Termo Partners news

Global cotton scenario all around the world; rates and fluctuations.

Textile Raw materials market
The cotton market in Pakistan remained dull with trading volumes remaining low throughout the week as buyers stayed away due to volatile economic conditions. The rates of cotton remained stable being rate of cotton was between Rs18000 to Rs20500 per 37.5 kg in Sindh. In Punjab, the rates varied between Rs18500 to Rs20000 per 37.5 kg. Phutti was traded at Rs7000 to Rs8300 per 40 kg and Rs7000 to Rs9200 per 40 kg in Punjab.

Polyester fiber prices were quoted at Rs345 per kg. The low trading volumes were because a large number of mills have closed to unsold yarn stocks. The others are operating at around 50 percent capacity. The surviving mills that imported cotton when the global rates were high are consuming expensive cotton and disposing of yarn at loss. The cotton imported at lower rates is awaiting clearance due to clearance issues. Cotton trading remained lackluster during the month of February in Pakistan.

Though there is no cotton shortage in India the spinners are plagued with large quantities of unsold stocks that have kept new cotton buying low. The spinners in Bangladesh are reeling under the pressure of a steep rise in gas and power rates. Like Pakistan, the government of Bangladesh has also slapped strict controls on foreign exchange and opening of letters of credit which also impacted spinning in the country.

According to the monthly Cotlook review by outlook international cotton prices, as measured by the Cotlook A Index, continued to fluctuate on either side of the dollar mark in February, under the lead of movements in the nearby ICE futures market. Barring a few sharp movements, daily changes in New York were fairly modest, and prices remained within the range that has been in force since early November. The A Index began the month at its high point of 101.35 US cents per lb and fell to a nadir of 96.85 cents late in the period, before regaining some ground to settle two cents below its opening level.

The slightly more optimistic market sentiment that emerged in January was dampened somewhat by a realization as the month wore on that mill demand appeared not to have revived to the extent expected by some observers. In Bangladesh and Pakistan, difficulties in opening Letters of Credit persisted and so business to those destinations was affected. However, late in February, it was reported that Pakistan had been granted a credit facility amounting to around US$700,000,000 by the China Development Bank, while talks were also ongoing with the International Monetary Fund to secure further funding. In the latter regard, considerable reforms have been required, including an increase in energy prices that have impacted the domestic textiles sector.

Vietnam mills were again among the more active buyers during February, with spinners entering the market when ICE futures fell to the low 80s cents per lb (allowing for a landed price below one dollar). Some import demand was also noted in China, predominantly from state-owned entities, facilitated by a convergence of local and international prices mid-month.

Meanwhile, in Turkey, humanitarian efforts eclipsed all other factors following the series of earthquakes that caused huge loss of life and widespread destruction of infrastructure across much of the southeast of the country, where the majority of the spinning and textiles industry is located. The volume of unshipped US cotton destined for Turkey was placed at 63 percent of that country’s total commitment equivalent to over 1.5 million statistical bales (480 lbs).

The US export reports issued during the month in question brought the total export commitment to within 10 percent of USDA’s projection for the season (12 million bales). The major destination for US cotton exports was still China (almost 2.3 million), largely by dint of unshipped commitments carried over from last season, and new purchases have featured over recent weeks, following a lengthy absence. In second place was Pakistan with slightly over two million bales, around 60 percent of which remained to be shipped.

While the historically high level of prices would normally encourage enthusiasm for cotton among farmers, the sharp rise in production costs (including higher prices for pesticides and fertilizer), as well as the relatively good returns obtainable from competing crops, have resulted in an expectation that planted area will remain about steady in 2023/24. The modest increase in production is therefore predicated on the assumption that weather conditions will be more benign than in the current season, which saw extreme drought in parts of the United States, flooding in Pakistan, and severe pest infestations in West Africa.

In the US market, May futures settled relatively unchanged each day. Recession fears weighed on cotton prices, keeping them down going into the weekend. May futures settled at 82.16 cents per pound, up just 16 points compared to the week prior. Total open interest decreased by 9,512 contracts to 185,136, hitting the lowest level of contracts since July 2022.

Outside markets recorded a mixed week, wavering from interest rate talks and economic data releases. During the week, the major indexes had the worst day of 2023 so far, being weighed down by uncertainty concerning interest rates. Stocks were in their usual volatile fashion and kept choppy throughout the week. The minutes of the last Federal Open Market Committee meeting were released, signaling rate hikes will continue. There was little mention that the hikes will be paused anytime soon. The dollar also had a volatile week before rallying upon the news that the Fed will likely keep interest rates higher for longer.

A marketing year high for export sales was reported for the week ending February 16. A net total of 425,300 Upland bales were sold for the 2022/23 crop year and 11,900 bales for the 2023/24 year. The Export Sales Report showed 16 countries bought cotton for the week, indicating a solid spread in demand. The biggest buyer for the week was Vietnam, booking 131,200 bales, followed by Pakistan 95,600 bales, Turkey 79,600 bales, China 46,200 bales, and Indonesia 19,200 bales. Shipments were up slightly from the week prior, with 193,600 bales exported. This is still behind the pace needed to reach USDA’s export goal of 12.0 million bales. Pima sales and shipments were down from the previous week, with sales totaling 1,400 bales and shipments of 3,900 bales reported.

USDA hosted the Agricultural Outlook Forum this week and released their initial forecast for the agricultural economy, which includes acreage and production figures. For the 2023/24 crop year, USDA estimated that 10.90 million acres of cotton will be planted, down 20.8 percent from 2022/23, which results in the production of 15.80 million bales. Due to competing crops or weather limitations, acreage decreases are expected across the Cotton Belt. Increased demand expectations and an improved global economy resulted in a projected increase of U.S. exports to 13.8 million bales. On the global side of the balance sheet, consumption is projected to increase 4.4 percent to 115.5 million bales, rebounding from the decrease seen in 2022/23. Global ending stocks are set to decrease slightly to 88.6 million bales. The release of these estimates did not have much of an impact on the market at the time of release, but these figures are a good baseline estimate of what is expected for acreage in the upcoming year.

The past week was relatively calm, with the usual Export Sales Report and outside markets continuing to be monitored. Next year’s cotton acreage will still be debated but the USDA forecast did give a good initial base case for next year. The Commitments of Traders report is set to resume this week.
Please leave your comments on this news