International cotton market changes during the National Day holiday

During the Mid-Autumn Festival and National Day holiday, seed cotton in Xinjiang has started to be procured, and meanwhile, new cotton in other cotton producing countries of North Hemisphere also starts to be arrived on the market successively. Different from China, cotton prices in India and Pakistan weaken due to increasing arrivals of new cotton. Although U.S. cotton export sales improve, ICE cotton futures market is dragged down by the lower bulk commodity affected by the macro environment. Brazilian cotton exports are hard to increase, and under the storage capacity pressure, prices move lower. International cotton prices are generally down compared with the period before the holiday.

U.S. cotton: export sales improve with the increasing procurement from China

According to USDA, by the week ending Sep 28, export sales of 2023/24 U.S. upland cotton were 54.4kt, up 334% from previous week. Though the accumulative export sales are obviously weaker than last year, the export sales have improved after continual sluggishness. This improvement was mainly attributed to the procurement from China with a volume of 28.6kt, accounting for 53%. With relatively high basis of Brazilian cotton and limited volumes of Australian cotton, U.S. cotton remains the major import origins for China. In addition, there are still the expectations of seed cotton procurement competition in China. No matter the state cotton reserves or the replenishment from spinners, once ICE cotton drops to around 85cent/lb, Chinese buyers will start to purchase. Currently, the soil moisture condition of U.S. cotton in the major cotton belts sees no obvious improvement. Good-to-excellent ratio maintains, while the harvests progress is behind last year. USDA may adjust lower U.S. cotton production in its Oct report.

Brazilian cotton: harvests are complete, and exports are hard to increase

As of the week ending on Oct 1, the overall harvest progress of cotton in Brazil reached 100%, with a week-on-week increase of 0.4%. The cotton harvest in Brazil has now been completed. According to ABRAPA's assessment, Brazil's cotton production in 2023 is expected to reach 3.2 million tons, setting a new historical record for national average yield and leading to optimistic expectations for next year's cotton production in the market. However, last year's exports of Brazilian cotton fell short of expectations, resulting in excessive initial stocks for the new year and increased pressure on domestic storage capacity. Due to limited transportation capacity at concentrated agricultural ports, although Brazilian cotton exports showed promising speed at the beginning of Sep, they subsequently slowed down and struggled to sustain momentum. Currently, Brazilian authorities are considering improvements in cotton transportation, such as expanding transportation from other ports. Given the sales pattern of Brazilian cotton, there is currently not much sales pressure. However, under the pressure of excessive storage capacity, forward basis is likely to weaken to promote export sales.

Indian cotton: rainfall reduces and new cotton arrives on the market successively

As the new cotton marketing year begins, the volume of newly harvested cotton in India will gradually increase. The main cotton-producing regions in India are experiencing a reduction in rainfall, which is favorable for picking the new cotton. According to data compiled by Indian Cotton Corporation, the weekly arrival of cotton is currently at a low level. As of the week ending on Sep 30, the weekly arrival of new and old crops in India was 27,700 tons. Oct data has not been updated yet, but market feedback suggests that the volume of new cotton has gradually increased. With increased supply and sustained weak downstream demand, the local cotton prices have declined.

Pakistani cotton: new cotton arrivals slow down and demand for cotton weakens

Pakistani cotton prices also go downward. Benefited from the favorable weather condition, Pakistani cotton arrives on the market earlier this year. Since Sep, local cotton prices have dropped with the increasing supply. Though growers are more reluctant to sell seed cotton recently and arrivals slow down apparently, cotton prices continue to go down. The reason for this is that the sharp depreciation of the rupee in the earlier period has benefited downstream textile companies in terms of their yarn exports. Compared to imported cotton, the price advantage of domestic cotton is evident, leading to active purchasing and stocking. However, the current exchange rate stability and limited growth in downstream orders, coupled with sufficient raw material inventory, have weakened the demand for cotton.