Today’s flash-in-the-pan rally might continue if we get a positive surprise in tomorrow’s export sales release. However, technically were are still in a bearish trend and unless we get a move above 77 cents in May, we are going to treat this as another bear market rally.
MCX As on 20-Feb-2019 Total Utilized Capacity = 1,79,103 Bales Eligible for Exchange Delivery = 1,34,900 Bales Quantity in Process = 39,300 Bales Rejected Stocks = 4,203 Bales
NCDEX As on 21-Feb-2019 Cotton Seed Oil Cake Stock Unencumbered = 48,628 MT Pledged = 5,213 MT QTY in Process = 1,857 MT
Cotton futures scale 2 – week peak on possible U.S. – China trade deal
ICE cotton futures on Thursday jumped more than 2 percent to hit their highest level in two-weeks on a report about a potential breakthrough in the U.S.-China trade dispute.
The most active cotton contract on ICE Futures U.S., the May contract , settled up 1.85 cent, or 2.56 percent, at 74.01 cents per lb.
India – The cotton Corporation of India (CCI) published its all Indian arrival report for 2018/19 season, whereby arrivals are pegged at 17.88 million bales till 8th of February 2019. As per market sources, CCI has procured above 0.85 million bales in the ongoing season, mainly attributed to weak prices which are trading below the Minimum Support Price. Yet, CCI expects procurement to reach 1.50 million bales by the end of the current season. However, for obvious reason the future market will define that final number.
The Western Disturbance over Jammu and Kashmir is gradually moving away eastwards. Its induced cyclonic circulation is over Punjab and adjoining parts of Haryana and North Rajasthan. A trough is running from this system up to West Uttar Pradesh. The low-level cyclonic circulation persists over West Assam. An anti-cyclone is marked over Jharkhand
The new crop Dec futures price is challenging support at the 72 to 73 cent area. After hanging around 74 to 75 cents for a while, prices are showing additional weakness. Dec futures at 73 cents or less excites no one that will be growing cotton this year. But we are reminded that Dec18 was at 76 cents this time last year. Dec18 eventually went to over 90 cents and no one saw that coming at the time.
Recent reports seemed to tell the market “don’t worry, the pipeline is flush with cotton throughout the season and there is a lot more on the way next season”. This has increased outright pressure and also forced more carry into the market.
While corn remains the major safrinha crop for Brazilian farmers, more cotton acreage is being planted in Mato Grosso this spring, as well.
Over the past two years, cotton planting has increased by nearly one-third for the safrinha in Mato Grosso. The Brazilian Association of Cotton Producers(Abrapa) forecast cotton acreage to grow to 1.4 million hectares (3.46 million acres). Mato Grosso accounts for about 88% of Brazil’s cotton production.
We believe that December is currently at the center of the pricing structure and that the other months are mainly a function of their relationship to December. Given the potential for larger US and global crops next season, we see it as difficult for December to rally anytime soon.
India – Cotton prices traded lower across major trading centres on higher supplies, slow buying for domestic mills and the export market. Lint prices for Gujarat 29mm are quoted around INR 42’300 per candy, equivalent to US Cent 77.25 per lb FOB Mundra, based on the prevailing exchange rae. The total India cotton arrivals reached 18.00 mio bales for the 2018/19 crop year (October-September period) till 31 st January 2019. The Reserve Bank of India (RBI) cut the key interest rate by 0.25% to 6.25%.
Firm price support has been found around 72 cents, as mills see this as a buying opportunity. I say this to be so, even though we’re all flying blind absent any USDA reports since the shutdown began.
That includes weekly exports sales, monthly supply and demand numbers, as well as weekly commitment of trader’s report.
The latest U.S. Department of Agriculture (USDA) projections for 2018/19 indicate that global cotton trade is forecast to rise nearly 2 percent from last season and reach its highest since 2012/13. World trade is projected at 41.7 million bales in 2018/19, 700,000 bales above last season but still 4.7 million bales below the record set 6 years ago.
Last month, I suggested that 80 cents or better would be a good target at which to do some additional pricing on a portion of remaining uncommitted production. That still holds. Prices have shown some willingness recently to move to 80 cents or better but have not been able to sustain it.
One would think with all the production and quality issues and uncertainties continuing to plaque the US crop, that the market would/could make a concerted move higher and stay there, but such has not yet been the case.
US Cumulative Cotton Export Sales 01-August-2018 To 06-December-2018
Top 10 Country
COUNTRY TOTAL % Of Total Sales VIETNAM 23,22,777 22.62% CHINA 16,15,821 15.73% MEXICO 10,16,915 9.90% INDONESIA 9,89,324 9.63% PAKISTAN 7,97,835 7.77% BANGLADESH 7,38,706 7.19% THAILAND 4,23,675 4.13% TURKEY 4,20,780 4.10% KOREA 3,58,752 3.49% INDIA 2,67,400 2.60%
Movement in global cotton prices was mixed over the past month, with values for NY futures moving slightly higher, values for Chinese prices moving slightly lower, and the A Index stable.
This month’s 2018/19 U.S. cotton forecasts include slightly higher production and ending stocks. Production is raised 180,000 bales due mainly to a 300,000-bale increase in Texas. Domestic mill use and exports are unchanged. Ending stocks, forecast at 4.4 million bales in 2018/19, are 100,000 bales above both last month and the 2017/18 estimate.
Watching the market last week was certainly not for the faint of heart. Even though March futures gained 132 points to settle at 80.23, it traded in a wide 325-point range. It began on a positive note when the U.S and China agreed to a 90-day truce in their ongoing trade war. The good news was short lived, however, when President Trump later tweeted he was still a “tariff man” followed by the arrest of a Chinese business executive. All this cast serious doubt on whether the two countries could negotiate a resolve.
Global Consumption Forecast at 27.5 Million Tonnes for 2018/19
Highlights from the November 2018 Cotton This Month report, regarding the 2017/18 season:
World ending stocks were 18.9 million tonnes • Global consumption grew 9% to 27 million tonnes • Global production increased 16% to 27 million tonnes • Despite increases in Brazil and West Africa, global area is expected to decline in 2018/19
The latest USDA cotton estimates for 2018/19 project world ending stocks to decrease 8 percent from the previous season to 74.4 million bales. With global cotton mill use forecast to exceed production, world stocks are expected to decline 6.4 million bales by season’s end, as lower stocks in China in 2018/19 more than offset higher stocks outside of China.
RECENT PRICE MOVEMENT Most benchmark prices decreased over the past month.
Values for the December NY futures contract moved lower in the second half of September, dropping from 82 to 76 cents/lb by early October. In later trading, prices have generally held between 76 and 78 cents/lb.
Historical Revisions to Indian's Cotton Balance Sheet - USDA
Historical Revisions to Indian's Cotton Balance Sheet - USDA
Historical revisions have been made to India’s balance sheet for the years 2002/03 through 2013/14, with the stock adjustment carried forward. The revisions are based on the conclusion that market yard arrivals data underreported arrivals in the early portion of the harvest season. This conclusion was based on observed market activity in November for several years.
U.S. Macroeconomic Indicators & the Cotton Supply Chain October 2018
Following a meeting in late September, the Federal Reserve increased interest rates for the third time this year. The official statement from the central bank indicated that they have confidence that economic expansion will continue and suggested that interest rates will likely increase again in December.
Online Kapas Sale Procedure With regard to online Kapas sale, following modus operandi may be followed: 1. Online Kapas sale can be undertaken broadly on the same lines as per the online cotton seed sale system followed by the Corporation at present, i.e. kapas may be sold online on per qtl. basis to the registered buyers. 2. For registration, the buyer has to pay refundable security deposit of Rs 5 lacs and shall have to obtain digital signature for participation in e-auction. ......
Major changes (larger than 40,000 tons): Australia 2018/19: production 580,000 tonnes (-56,000 tonnes) Brazil 2018/19: production 2.1 million tonnes (+42,000 tonnes)
2017/18: production 2 million tonnes (+41,000 tonnes) China 2018/19: production 5.8 million tonnes (+150,000 tonnes)
Decreases Expected in Area, Yields and Production in 2018/19
• Global cotton area projected to decrease 2% to 33.4 million tonnes • Global yields expected to decrease 1% to 777 kg per hectare • Global production projected to decrease 4% to 26 million tonnes • Stocks in China are at their lowest level since 2011/12
Our annual Long Staple Special Feature is published at a potentially significant moment in the evolution of the world market for upland cotton. Notwithstanding the short-term fluctuations of the market, underlying bullish sentiment has steadily been building, as the unexpected strength of world raw cotton consumption during the 2017/18 season, coupled with the disposal of additional Chinese stocks, has influenced the statistical outlook.
Area and Production: Post has reduced the MY 2018/19 cotton area forecast to 11.8 million hectares, 100,000 hectares lower than the official USDA estimate. The reduction in area is primarily in the two major cotton growing states of Gujarat and Maharashtra. Deficit rains and pest pressures have prompted farmers to either plant alternate crops, or delay/abandon planting altogether
