LAHORE: The local cotton market on Saturday remained steady while the trading volume was low. The Spot Rate remained unchanged. Cotton Analyst Nasseem Usman while talking to Business Recorder said after being locked sideways all week, the cotton market posted a sharply higher finish Friday.
News that China had issued new import quotas, as well as confirmation of an extended La Nina condition this summer from NOAA, ran the market higher. For the most part, the main buyers were speculators.
Friday afternoon, the CFTC will update the stance of various speculators. The most watched-group are the managed-money index funds. At last count there were net long some 77,500 contracts.
The new crop market continues to anticipate the Prospective Plantings report on March 31. Tabulators are gathering that data now. Already there have been private surveys which have shown increased acres for 2022, but given the potential adverse weather and the higher input costs, acres may be not as great as initially thought.
Moreover, finally, a little trading based on cotton fundamentals. Solid triple digit gains of 300 to 400 points were a welcome sight. Even the new crop 2022 and the red December 2023 made solid gains, with December 2023 trading up to 84.25.
Cotton supplies, at least into May 2023, are in question. It’s too early to hang our hat on weather. However, even absent the drought, the market is asking the question, “Will there be enough cotton available in 2022?”
Both the war rhetoric and tragedy have heaped uncertainty on cotton trading more so than on other commodities as more direct fundamental impacts were visible in other commodities. The cotton market has battled through one of its natural price consolidation phases and has come forward with a firmer, hopefully less volatile outlook.
Once again, supply and demand do matter and are the principal price determinates – just as Adam Smith told us in 1776 in the publication of his “The Wealth of Nations” (incidentally, his publication was but one of the three great events that year).
The bulls grew tired of grazing and talk of being slaughtered and came back to the ring at week’s end. The old crop once again set its sights on 125 cents, potentially buoyed by on-call sales and a potential run to 130 cents possible. The new crop December continues to clearly point to the potential of questionable supplies and the lack of enough quality cotton. A December run to 107-112 cents is now visible.
Cotton prices, as expected, have struggled since the beginning of Russia’s invasion of Ukraine. However, the ongoing tightness in world supply has jolted the market back to the reality of the imbalance in cotton supply and demand.
The Spot Rate remained unchanged at Rs 20,000 per maund. Polyester Fiber was available at Rs 280 per kg.
Copyright Business Recorder, 2022
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