Cotton Futures hit 4-week low and are still marching lower

Cotton Futures were lower, hitting a four-week low and trends were still trying to turn down. Weak overall demand continued to adversely impact the US market but reports of a smaller supply was providing the support. Ideas are that cotton production can be reduced. USDA reports stated that some of the crop was left in the fields well into the winter season. Demand was also less as reports are not been very strong this year. China is not reported to be buying in the US market. Exports expect an uptick in ending stocks estimates, while world production and supplies are seen going a little higher. Cotton is also down because US-China trade fears back into the market. US officials said on Thursday said that US President and Chinese President are unlikely to meet before their 1 March deadline to reach a trade deal. The trade dispute had led to cotton's first yearly decline in four years in 2018.

The most active cotton contract on ICE Futures US, the March contract settled at US cents 72.55 per pound, US cents 1.09 down from last week while December settled down US cents 0.19 at US cents 73.93 per pound.

Global spot benchmark, the Cotlook A index, also declined US cents 1.70 hitting a five-week low at US cents 82.05 per pound.

In China, spot cotton markets were quiet, with some ginners yet to resume operation. Offers in Hebei for non-Xinjiang origin grade-3128 were at 14.90-15.00 Yuan a kg (about US cents 101 per pound), self-lifting from warehouse. Before the holidays, offers for US-origin EMOT SM January/March loading cotton were at 15.18 a kg (US cents 103 per pound) and at 14.46 a kg (US cents 98 per pound) under 1% in-quota tariff. Meanwhile, the China Cotton Index gained 1 Yuan this week, to close at 15,503 a ton (US cents 105 a pound).

In Pakistan, cotton spot rate fell on modest trade after maintaining a stable trend for a long time. The official spot rate dropped PakRs 100 to PakRs8,760 per maund ex-Karachi (US cents 76.52 per pound) in the process of modest trading activity. Raw cotton in Sindh and Balochistan were traded at PakRs.3,000-3,500 per maund and at PakRs.3,000-3,600 per maund in Punjab. Few leading mills had rushed to meet their urgent requirements. The slow off-take implied that local market was not moving in the right direction due to poor condition of global economy. Despite falling cotton production globally, prices are not moving upward mainly because of slow demand by buyers. The world cotton yarn market was also not creating much demand, reports said.

In India, Cotton Association of India decreased its last estimate from 335 lakh bales to 330 lakh bales. Thus, it will be interesting to see how prices move after the downward revision. Benchmark, Gujarat Shankar-6 was traded at INR42,200 per candy (US cents 75.72 per pound), down INR200 from last week.

Cotton yarn

Cotton yarn markets were quiet in China during the holiday week and reopened steady following the Spring Festival. However, transaction was relatively muted. With workers resuming their operation and downstream weaving mills returning step by step, cotton yarn markets are expected to turn better gradually. Producers’ offers in Jiangsu for combed 32s were steady while in Hebei offers for OE 16s rolled over. It is likely that the cotton yarn market in China will move up gradually in line with a slow recovery in downstream weaving sector in coming week. In Pakistan, cotton yarn prices were stable in Karachi market while they eased in Faisalabad market with most offers significantly revised down. In India, domestic prices rolled over while export offers were hiked.

In China, cotton yarn prices were steady both in Yuan terms and US$ term in a holiday packed week. 32s yarn were at 22.90 Yuan a kg (US$3.41 a kg), while 40s were at 24.00 Yuan a kg (US$3.58 a kg). Combed yarn prices of 32s were at 23.50 Yuan a kg (US$3.50 a kg) and 40s at 26.30 Yuan a kg (US$2.92 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 PakRs7-10 at PakRs174-181.50 per pound (US$2.75-2.87 a kg, down US cents 12-17). In India, 30s carded cotton yarn for knitting rolled over at INR231 a kg (US$3.24 a kg) in Coimbatore while export offers were up US cents 2 at US$2.90 a kg.