Cotton Futures were higher on reports that China was willing to buy massive volumes of agricultural goods, including cotton. Speculators were the best buyers. Reportedly negotiators are working on six different memoranda of understanding covering all or most of the dispute. Cotton trends were trying to turn up for the short-term, and the market held nearest support. Fresh demand from China will have great impact on the market. China and US will meet again next week to finalise trade agreements. Production from exporter countries such as India and Pakistan is likely to be less than projected by the USDA. Although supplies are there, demand needs to improve as USDA releases more export sales reports in coming weeks. The USDA estimated cotton planted area at 14.3 million acres for the coming year.
The most active cotton contract on ICE Futures US, March settled up US cents 1.62 at US cents 71.84 per pound from last week while December settled at US cents 73.51 per pound, up US cents 0.71 week on week.
Global spot benchmark, the Cotlook A index, also gained US cents 2.30 at US cents 82.25 per pound, having rebounded US cents 1.95 on weekend. Last week it hit a six-week low.
In China, spot cotton market firmed up a bit on gains of CZCE as easing China-US trade relationship fueled sentiment in the US. More enquiries emerged in spot market, and suppliers lifted offers a bit. Xinjiang- origin cotton grade-3128 mechanically-picked was sold at 15.80 Yuan a kg (US cents 106.76 per pound), while offers for non-Xinjiang origin cotton grade-3129 m were at 15.20 (US cents 102.70 per pound). Offers for imported cotton of US-origin EMOT SM for January to March loading were at 15.04 Yuan a kg (US cents 101.63 per pound) and at 14.236 Yuan a kg (US cents 96.19 per pound) under 1% in-quota tariff. Meanwhile, the China Cotton Index gained 12 Yuan a ton this week, to close at 15,501 a ton (US cents 104.74 a pound).
In Pakistan, cotton prices came under pressure in line with world markets and slower demand for cotton yarn which kept spinners away from the proceedings, and only some needy small mills were seen in the market. As a result, the Karachi spot rate lowered by PakRs100 to PakRs8,660 per maund (US cents 75.34 per pound) ex-Karachi. The market also witnessed higher trading volume in the aftermath of Pulwama attack in India, dashing hopes of cotton imports from India. Meanwhile, buyers were more inclined towards meeting their cotton demand from domestic sources as fears mounted that Pakistan may slap 200% per cent duty on products coming from India.
In India, subdued demand and sufficient stocks weighed on cotton price despite lower output forecast. However, the decline may be limited due to government support price. Prices declined this season despite the forecast of lower production and higher exports for the first three months of the season. Cotton futures were down more than 14% compared to levels at the beginning of the harvest season in October. Meanwhile Benchmark, Gujarat Shankar-6 was traded steady on the week at INR41,700 per candy (US cents 74.71 per pound), while some varieties were down INR300-700 per candy and some up INR100-400 per candy from last week.
Cotton yarn
Cotton yarn market in China were under correction with major deals reported for 32s and combed 40s, while demand for other specs was not as smooth. Producer in Henan offered for 40s at a roll over from last week, with large discounts in firm deals. Overall, cotton yarn market is likely to move up gradually in line with slowly recovering weaving sector in downstream and uptrend in cotton prices. In Pakistan, cotton yarn markets in Karachi reported no change in prices while in Faisalabad coarser count yarn were cheaper and finer ones dearer. Prices of 8-10s count were down while 60-80s count saw sharp rise. However, with sluggish cotton market performance this week, yarn prices may turn weak ongoing forward. In India, cotton yarn prices did not move amid weakening cotton prices and implying poor offtake in export market.
In China, cotton yarn prices remained unchanged in Yuan terms but up US cents 1-3 in US$ term due to strong Yuan. 32s yarn were at 22.90 Yuan a kg (US$3.41 a kg), while 40s were at 24.00 Yuan a kg (US$3.57 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 rolled over at PakRs175-180 per pound (US$2.76-2.84 a kg), while 32s cone in Faisalabad were up PakRs3 at the lower end an up PakRe1 at the upper end at PakRs175-186 per pound (US$2.76-2.93 a kg, up US cents 2-5). 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.
