Daily global cotton market report

06 Feb '09

4 min read

Last night in New York futures market, March 2009 closed at 49.71 with a gain of 4 points while the volume traded was 7134 contracts and the May 2009 closed at 50.34 with a loss of 24 points and the trading volume was 4367, while July 2009 was closed at 51.20 with a loss of 60 points and the trading volume was 2346 contracts. The Cotlook A index declared settled at 57.85 with no changes.

The spot rate at KCA remained firm and strong, so the settlement declared at Rs 3350 per maund as it was the other day with no changes today. In the local market 6000 bales changed hands in Punjab at a unified rate of Rs 3475. Rest of the market seems quite .

According to recently released figures of USDA, US export sales for week ending 1/29/2009, cotton net upland sales stood at 92,400 running bales (rb), down 14 percent from the previous week and 60 percent from the prior 4-week average. Increases reported for Pakistan (26,800 rb), Mexico (19,200 rb), Turkey (9,700 rb), China (8,700 rb), Indonesia (8,200 rb), Thailand (7,800 rb), and Bangladesh (7,100 rb), were partially offset by decreases for Japan (1,700 rb) and El Salvador (1,100 rb).

Net sales of 4,100 rb for delivery in 2009/10 were for Mexico. Exports of 194,500 rb were up 41 percent from the previous week and 13 percent from the prior 4-week average. The primary destinations were China (63,200 rb), Turkey (34,500 rb), Mexico (30,700 rb), Vietnam (8,100 rb), Indonesia (7,900 rb), and Bangladesh (7,700 rb). Net American Pima sales of 1,700 rb were mainly for unknown destinations (1,000 rb), Japan (300 rb), and Indonesia (200 rb). Exports of 1,300 rb were mainly to China (700 rb) and Indonesia (400 rb) .

Cotton is one of the more economic sensitive commodity markets and all markets moved sharply lower into late 2008. If you are of the belief, that the US and world economy will bottom out and show improvement by the middle of this year, then the recovery of the 2008 lows may continue. The market is faced with the possibility of sharply lower planted area for the US and lower planted area for China for the coming year.

If this occurs as demand begins to recover, tightening stocks could be a significant issue. However, if demand remains slow, stocks will decline but not to the point of "tightness". Keep in mind: 2008/2009 stocks/usage is expected to be near 42.6% as compared with tighter years such as 03/04 at 17.2%, 97/98 at 20.6% or 95/96 at 14.2%. China officials pegged the 2008 crop at 7.5 million tonnes, down 1.6% from the 2007 record but some officials believe the crop was near 7.8 million tonnes.

China is the world's largest consumer but the global recession has (and is) hitting China textile exports in a major way. China demand is thought to be near 10 million tonnes last year so the coming year looks down considerably. In addition, China has been buying local crops to support producer income and is building a reserve of 2.72 million tonnes. China failed to use near 1 million tonnes of import quotas last year and imports for 2008 were down 14% to 2.11 million tonnes.

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