Cotton futures were mixed again and held well considering the dismal US export sales report as traders tried to decide on the direction of the market for the short-term. The USD reported exports dropping 67% over the last week. The recent hurricane in the Southeast brought ideas of big losses, and the USDA did show significant quality losses in its weekly updates, and further damage might be seen in the reports that will follow next week.
The media continued to show images of widespread devastation in cotton fields, with many plants blown over and destroyed and cotton on the ground. To support prices now, export demand needs to improve soon and significantly this year, but any increase in demand needs to come with no purchases from China for a while. Players in India remained optimistic of a good crop and will not need to import very much this year. December contracts lost US cent 0.45 week-on-week to close at US cents 77.92 per pound, while March was down US cent 0.19 to finish at US cents 79.36, widening the premium over December to US cents 1.44. December 2019 also edged down US cent 0.31 to close at US cents 76.68 per pound.
China has been actively buying Indian cotton and will buy as much as possible to avoid buying much from the US. At an International Cotton Conference held in Hong Kong, China placed huge orders for import of cotton from India. In China, cotton spot prices were corrected slightly down. Grade-3128 fresh cotton in the domestic market was quoted at 15.50 Yuan a kg (US cents 101 per pound), leading to increased enquiries from textile producers, but trading was slower. The China Cotton Index continued to decline this week by 87 yuan, to close at 15,898 a ton (US cents 104 a pound, down US cent 1 from last week).
Global spot benchmark, the Cotlook A Index, however, rose US cents 1.10 on the week to close at US cents 87.25 per pound, having remained flat on the weekend.
In Pakistan, cotton buyers were actively buying big lot in fear of further increase in the US$ value against the PakRe, while millers were building stocks from local source. Resultant, cotton prices moved higher and touched peak level at PakRs9,000 per maund on the ready counter. In line, the Karachi Cotton Association official spot rates were also raised. During the week, KCA spot rate recorded increase of PakRs400 per maund which in addition to the PakRs700 raise registered last week, pushed the spot rate to PakRs9,060 per maund ex-Karachi by end of this week. Seeing prices rising, growers and ginners started holding on raw cotton in expectation of getting better rates later.
In India, prices of coarser cotton were seen this week, while average to finer varieties were cheaper as spot prices moved above the MSP. Reports pointed out that traders were buying cotton at INR50-100 more than MSP and once arrivals peak. Meanwhile, the Cotton Corporation of India, which was gearing up for procurement operations at MSP from farmers will have to wait for a while as prices are above the MSP. Spot prices were ruling at INR5,800 per quintal after jumping nearly INR800 per quintal over the last 10-12 days.
Cotton yarn
The cotton yarn market was under correction in China this week as producers did not hold enough confidence on the situation in a busy season. Prices suffered setbacks for various reasons, while deals were mainly concluded for 32s and 40s yarn. Producers in Shandong reported moderate sales of carded cotton yarn and OE yarn, with offers for compact spun flat to down. 32s cotton yarn prices fell to 24.10 Yuan a kg (US$3.47 a kg, down US cents 3) while 40s fell to 25.20 Yuan a kg (US$3.63 a kg, down US cents 3). Coarser yarn prices of 16s were flat at 15.30 Yuan a kg (US$2.21 a kg) and 21s at 19.50 Yuan a kg (US$2.81 a kg).
In Pakistan, cotton yarn prices were seen adjusted slightly down in Faisalabad market in order to negate the impact of falling PakRe on export. At the Shanghai Yarn Expo held during the week, Indian exporters could manage to bag large orders from Chinese importers since Pakistan yarn was costlier. 30s carded prices in Karachi were flat at PakRs168-170 per pound (US$2.79-2.83 a kg, down US cents 3 due to weak currency), while 32s cone in Faisalabad were down PakRs2.50 at PakRs175-189 per pound (US$2.91-3.14, down US cents 8).
With the cotton marketing season progressing in India, yarn makers were not in a hurry to stock the fibre and kept cotton yarn prices stable this week. 30s carded cotton yarn for knitting rolled over at INR230 a kg (US$3.13 a kg) in Coimbatore.
