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All you need to know about cotton this week.

Textile Raw materials market
Cotton farmers in Pakistan are facing financial losses as the prices of the produce have fallen below the official support price across the country.

Cotton rates in the country continued to decline. In Sindh, it is trading at Rs14000 to Rs16500 per maund. The rate of Phutti in Sindh is still lower than its support price ranging between Rs 6,000 to Rs 7,800 per 40 kg. The rate of cotton in Punjab was almost the same as in Sindh ranging from Rs14000 to Rs16400 per maund and the rate of Phutti in Punjab is higher ranging between Rs6500 to Rs8500 per 40 kg. The rate of cotton in Balochistan is higher on the lower side at Rs15000 but it was lower on the higher side at Rs15500 per maund while the rate of Phutti is between Rs 7000 to Rs8200 per 40 kg.

400 bales of Dadu were sold at Rs 15,800 per maund, 1400 bales of Rohri were sold at Rs 15,000 to Rs 15,200 per maund, 1800 bales of Khair Pur, 1800 bales of Saleh Pat were sold at Rs 15,000 to Rs 15,300 per maund, 400 bales of Sanghar, 400 bales of Mir Pur Khas were sold at Rs 13,700 per maund, 400 bales of Dera Ghazi Khan were sold at Rs 17,000 per maund (Balochi), 800 bales of Yazman Mandi were sold at Rs 15,500 to Rs 16,000 per maund, 600 bales of Rajan Pur were sold at Rs 14,200 per maund, 1600 bales of Haroonabad were sold at Rs 15,700 to Rs 16,300 per maund, 200 bales of Chishtian were sold at Rs 15,300 per maund, 200 bales of Tunsa Shareef were sold at Rs 15,200 per maund, 600 bales of Murreed Wala were sold at Rs 14,800 per maund, 600 bales of Fort Abbas were sold at Rs 15,300 to Rs 15,700 per maund, 800 bales of Chichawatni were sold at Rs 14,900 to Rs 15,000 per maund, 800 bales of Rahim Yar Khan were sold at Rs 16,000 to Rs 16,300 per maund, 200 bales of Lodhran were sold at Rs 15,800 per maund and 200 bales of Hasil Pur were sold at Rs 14,800 per maund.

The government had fixed the support price of raw cotton in March at Rs8500 per 40kg. However, it is being bought from farmers at Rs6000 to Rs7000 per 40kg in all the markets across Punjab. An Agriculture Department official said a price of Rs8500 for raw cotton had been announced but the notification in this regard had not been issued yet. He said the Trading Corporation of Pakistan (TCP) had not begun procuring cotton so far and the sale on the support price would be ensured after the process would begin.

Meanwhile, cotton production in Punjab, the country’s main cotton-growing region, has been disputed by the provincial government and the industry body, with a huge gap between their estimates for the crop size, data showed.

According to a fortnightly report released by the Pakistan Cotton Ginners Association (PCGA), production of the silver fiber in Punjab had reached 2.543 million bales by October 15, 2023, while the provincial Agriculture Department insisted output had boosted to 5.026 million bales during the same period, showing a staggering 97.64 percent more crop size. Interestingly, Punjab did not issue per acre yield data for the fortnight, which is deemed necessary for having a better understanding of crop size.

The worrying thing about the latest PCGA stats is the dwindling trend in cotton arrival during the fortnight. Against the previous fortnight’s flow of 1.091 million bales, ginners recorded 0.970 million bales of cotton in the two-week period that just concluded.

However, the fall in cotton flow to ginners’ factories in the Punjab province in the first half of October is a worrying development, if PCGA data is to be believed. In the middle of the cotton-picking season, farmers in Punjab provinces sold 0.473 million bales of cotton to ginners in the first fortnight of October 2023, compared to 0.524 million bales sold in the last fortnight of September 2023, a decline of 11 percent.

In India Farm gate prices of good quality cotton during October-November this year will likely rule around ₹6,800-7,000 per quintal. Cotton sown during the current season will fetch ₹7,100 during January-February 2024, according to a survey carried out by the Domestic Export and Marketing Intelligence Cell (DEMIC) of Tamil Nadu Agricultural University (TNAU).

This is higher than the minimum support price of ₹6,620 a quintal fixed by the Centre for this season (October 2023-September 2024).

In the United States, the December futures fell to the lower end of the trading range, settling lower for four consecutive sessions.

December futures faced pressure from geopolitical tensions, technical selling, and increasing certificated stocks this week. Cotton prices went into the weekend higher, but quickly reversed direction on Monday. Options expiry was also a source of selling throughout the week. This week, December fell below 86.00 cents per pound for the first time in 3 weeks and continued to fall as the week went on. Prices were lower, with uncertainty about the WASDE release the next day. The market could not decide which direction to trade upon the release of the WASDE Report but eventually settled lower for the fourth consecutive day. December futures fell to the lower end of the recent trading range for the week ending December 12, declining 162 points to settle at 84.92 cents per pound. Daily trading volumes were higher this week, but total open interest was relatively unchanged, dropping just 33 contracts to finish at 251,610. Certificated stock continues to rise, and reached 43,571 bales, an increase of 3,754 bales from the week prior.

Stock markets trended higher most of the week, before snapping a 4-day winning streak on Thursday as key inflation data was released. On Friday, U.S nonfarm payrolls unexpectedly rose by 336,000 in September, showing a strong labor market. A geopolitical conflict arose between Israel and Hamas over the weekend, and the conflict has continued through the week. The conflict initially supported crude oil prices, but prices fell under pressure on a stronger dollar and U.S. crude production climbed to a record. The U.S. Producer Price Index (PPI) for September came in at a 0.5 percent month-over-month increase, slightly higher than expectations and caused stocks to waver on Wednesday. On Thursday, the U.S. Consumer Price Index (CPI) also came in marginally higher than expected, rising 0.4 percent in September. The U.S. Dollar fell off early in the week but moved higher after the stronger-than-expected that CPI was reported. Finally, the minutes of the last Federal Open Markets Committee (FOMC) meeting were released this week and indicated that most Fed officials would not be surprised to see one more interest rate hike before the year ends.

The release of the World Agricultural Supply and Demand Estimates (WASDE) Report on October 12 captivated traders’ attention. The changes made to the U.S. side of the balance came in as expected, making it an overall neutral report. A decrease in production of 315,000 bales brought total production in the U.S. down to 12.817 million bales. Exports also decreased 100,000 bales to 12.20 million bales, a reflection of tighter supply. The changes made to production and exports flowed into ending stocks, which decreased 200,000 bales to 2.8 million bales. For the Southwest, overall production declined. As expected, a decrease in Texas production of 400,000 bales to 3.8 million bales was reported. Kansas production increased 38,000 bales to 165,000 bales, and Oklahoma also had a slightly surprising increase of 10,000 bales to 270,000 bales.

Noticeable changes in how the Brazilian crop is reported were made to reflect the timing and expanding crop in the country. USDA adjusted how production and ending stocks were reported each year going back to 2000/01. The previous reporting method showed current production on last year’s balance sheet, meaning production estimates have been shifted forward a marketing year. September’s report showed the 2022/23 expected production in Brazil to be 14.4 million bales but is now being reported as expected production in 2023/24, which will help reduce the crossover of marketing years. These changes were reflected in a 10.34 million bale reduction to beginning stocks, bringing it to 82.84 million bales. A 10.04 million bale decrease in ending stocks was also made, which brought the total to 79.92 million bales. Besides this significant change, there were a few changes on the global side of the balance sheet.

The Export Sales Report was delayed for the week ending October 5, and while the content of the report is not covered in this week’s activity, we feel that it is important to see what demand for U.S. cotton looked like for the week. Overall, this week’s report held poor sales and shipments. A net total of 43,400 Upland bales were booked this week, with China being the biggest buyer at 21,700 bales. Although the USDA export estimate was lowered this week, the 104,000 bales of cotton shipped are far below the pace needed to reach that goal. The report also showed 18,000 bales of cotton were canceled, with 8,600 of those canceled bales stemming from Pakistan. Net sales and shipments of Pima cotton were also down. A net total of 2,500 Pima bales were sold and 3,400 bales were hipped.

As usual at this time of the year, weather conditions have become a main concern across West Texas, Oklahoma, and Kansas now that harvest is picking up speed. A cold front blew in over the weekend but faded during the week to bring warmer, dry temperatures. Another front is expected in the coming week, which will have slightly cooler temperatures, but overall conditions are expected to be clear and dry, allowing harvest to proceed without interruption. In South Texas, the season is almost over now that ginning and classing are wrapping up. Across the country, 82 percent of bolls have opened and 25 percent of the crop has been harvested, both in line with typical pace.

Now that the market has new data to trade on, the focus will shift back to the usual factors impacting the cotton market. Weather will be monitored much more closely now that harvest has begun. The typical weekly reports will be back on the normal release schedule, which will help traders get a feel for where demand lies for U.S. cotton.
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