Cotton US futures were higher, with December being the strongest month. Some on call pricing was reported done as demand for US cotton was been hard to find. Funds were also buying as the stock market staged a recovery rally. The potential for crop losses in the US and also in India was more apparent over the last weekend and this also supported the market. Reports indicated that Indian output suffered from dry weather earlier in the season and that crop losses are expected major growing areas. As per USDA, the estimated production was down in India and Pakistan due to bad weather, which may impede India to meet all the demand from China.
December contracts gained US cent 0.61 week-on-week to close at US cents 78.53 per pound, while March was up US cent 0.47 to finish at US cents 79.83, narrowing the premium over December to US cents 1.30. December 2019 also inched up US cent 0.65 to close at US cents 77.33 per pound.
Global spot benchmark, the Cotlook A index, however, edged down US cents 0.45 on the week to close at US cents 86.80 per pound, having remained flat on the weekend.
In China, spot cotton price fell somewhat in line with the tumble of cotton futures in Zhengzhou Commodity Exchange. Offers for mechanically-picked North Xinjiang-origin fibre were at 15.70 Yuan a kg (US cents 102 per pound, up US cent 1 from last week). The China Cotton Index continued to slide this week by 67 Yuan, to close at 15,831 a ton (US cents 103 a pound, down US cent 1 from last week).
In Pakistan, cotton markets were under pressure as buyers restricted their activity to meet near future demand. Trading was adversely impacted due to uncertainty on the currency market and falling cotton prices internationally. A cautious approach by spinners eventually forced ginners and growers to reduce prices. The market was caught by surprise when Saudi Arabia approved financial aid to Pakistan – which helped the PakRe to stabilise and pushed cotton prices lower. According to Brokers’ Forum, the currency market was also consolidating on hope of Chinese financial assistance. This is likely to arrest any upward movement in cotton prices in the coming future. Reports suggested that spinners have booked around 1.8 million bales of imported cotton. Around four million bales would be imported this season due to short crop. During the week, KCA spot rate declined PakRs250 to PakRs8,810 per maund ex-Karachi at close of this week.
In India, cotton prices jumped this week as arrivals were still below the normal levels during this period. Prices also found support of a higher support price, announced by the government, and a lesser crop size this year. However, the Indian Cotton Federation believes that cotton availability will be adequate as production had increased due to a 13% rise in crop area although crop damages are reported due to pink boll worm in certain areas. But the impact on cotton production will be much lower than last year. Benchmark, Gujarat Shankar-6 was traded at INR46,800 per candy, up INR200 from last week. However, prices of finer variety cotton continued to fall.
Cotton yarn
The cotton yarn market in China saw limited transactions in spite of the price of some individual varieties declining further. Demand for cotton yarn 32s and 40s combed was relatively better, while the transaction of other specs was moderate. As the cotton yarn market was under correction, producers held poor confidence on the situation despite being a busy season. 32s cotton yarn prices fell to 23.95 Yuan a kg (US$3.45 a kg, down US cents 3), while 40s fell to 25 Yuan a kg (US$3.60 a kg, down US cents 4). Coarser yarn prices of 16s rolled over 15.30 Yuan a kg (US$2.21 a kg), while 21s moderated to 19.40 Yuan a kg (US$2.79 a kg, down US cents 2).
In Pakistan, cotton yarn prices were seen rising in Faisalabad and Karachi markets, reflecting the recent surge in cotton prices, which touched peak levels last week. However, with cotton prices falling this week, there will soon be a yarn price correction. 30s carded prices in Karachi were up at PakRs175-180 per pound (US$2.89-2.97 a kg, up US cents 10-14), while 32s cone in Faisalabad inched up at the lower end and declined at the upper end to PakRs175.50-187 per pound (US$2.90-3.09).
In India, cotton yarn prices were steady although cotton markets are yet to discover price level for this season. 30s carded cotton yarn for knitting remained unchanged at INR230 a kg (US$3.13 a kg) in Coimbatore while export offer rolled over at US$2.90 a kg.
