Cotton down but demand for US cotton improving

Cotton futures slightly increased in consolidation trading but trended down on the week. The USDA reports had no reason for big rallies at this moment but were not also that bearish. The weekly export sales reports have started to show improved demand for US cotton, but fresh demand from China would change the market scenario. The US and China will meet again hoping to find a trade agreement. There are talks of lesser output from exporting countries such India, but USDA did not reflect these losses in its reports. The ICE cotton futures had settled slightly higher midweek, snapping a four-day losing streak on prospects of a trade deal between the US and China. It slipped more than 1% on Thursday to its lowest since November 2017, after investors liquidated their long positions and rolled over their positions from the front month contract.

The most active cotton contract on ICE Futures US, March settled at US cents 70.22 per pound, down US cents 2.33 from last week while December settled down US cents 1.13 at US cents 72.80 per pound.

Global spot benchmark, the Cotlook A index, also lost US cents 2.10 hitting a six-week low at US cents 79.95 per pound.

In China, spot cotton markets were range-bound amid wait-and-see sentiment. Offers for Xinjiang-origin grade-3128 hand-picked were at 15.70-15.80 Yuan a kg (US cents 105-106 per pound). Imported cotton prices inched higher with offers for US-origin EMOT SM March loading at 14.80 Yuan a kg (US cents 99.27 per pound) and at 13.86 Yuan a kg (US cents 93.01 per pound) under 1% in-quota tariff. Cotton markets are likely to remain range-bound in the coming week. Meanwhile, the China Cotton Index lost 14 Yuan this week, to close at 15,489 a ton (US cents 103.92 a pound).

In Pakistan, a lack of buying interest was witnessed once again on the cotton market despite surge in US$ value versus the PakRe and short crop in India. The official spot rate remained unchanged at PakRs8,760 per maund ex-Karachi, throughout the week. Expectations of revival in trade activity had propelled mills and spinners to make deals on the cotton market on Thursday. Experts opined that the trend in international markets was low due to world recession. There are rising anticipations that cotton production to show improvements following the corrective measures announced by the Pakistan government. According to reports, both mills and ginners were busy deciphering the emerging developments on the political front.

In India, cotton import deals slowed as the fall in domestic prices outpriced overseas shipments. Earlier this week, cotton futures on the Multi Commodity Exchange of India slumped to an 11-month low. Since start of the season, traders have contracted imports of 0.9-1.0 million bales and 0.4 million bales have reached India so far. Meanwhile Benchmark, Gujarat Shankar-6 was traded at INR41,700 per candy (US cents 74.67 per pound), down INR500 from last week.

Cotton yarn

Cotton yarn markets in China were steady with sales volume for 32s rebounding slightly, while other specs saw thin transactions. Producers in Jiangsu offered for 32s at stable rate while producers in Henan and Shandong offered discounts for the discussion over firm deals and offloaded goods actively. Going ahead, cotton yarn markets will move up gradually in line with slow recovery in downstream weaving sector. In Pakistan, cotton yarn prices were stable in the Karachi market, while they moved either sides in the Faisalabad market. Popular count 32s yarn prices were revised down at the lower end, while finer count 60s and 80s were dearer. In India, sluggish cotton market prompted yarn markets to roll over prices this week, but are likely to moderate given the poor demand, both in domestic and export markets.

In China, cotton yarn prices rolled over in Yuan terms but down US cents 2-3 in US$ term due to weak currency. 32s yarn were at 22.90 Yuan a kg (US$3.39 a kg), while 40s were at 24.00 Yuan a kg (US$3.55 a kg). Combed yarn prices of 32s were at 23.50 Yuan a kg (US$3.48 a kg) and 40s at 26.30 Yuan a kg (US$2.89 a kg). In Pakistan, 30s carded prices in Karachi were stable at PakRs175-180 per pound (US$2.77-2.85 a kg), while 32s cone in Faisalabad were down PakRs2 at the lower end an up PakRs3.50 at the upper end at PakRs172-185 per pound (US$2.71-2.92 a kg, down US cents 3 and up US cents 5, respectively). In India, 30s carded cotton yarn for knitting were steady at INR231 a kg (US$3.24 a kg) in Coimbatore while export offers were stable at US$2.90 a kg.