LAHORE: The local cotton market on Tuesday remained dull while the trading volume remained low. Cotton Analyst Naseem Usman told that the rate of cotton in Punjab and Sindh is in between Rs 18000 to Rs 21,000 per maund.
ICE cotton futures fell to a two-week low on Monday, pressured by a rally in the dollar and concerns over demand from COVID-hit China.
The most-active second-month cotton contracts on ICE futures for July fell 2.35 cents, or 1.73%, to 133.50 cents per lb, at 11:41 a.m. ET (1541 GMT). It traded within a range of 132.33 and 136.26 cents a lb, the lowest since April 11.
The dollar reaching a new high, along with China going into lockdown due to a high number of COVID-19 cases, are the two main reasons for the market to be down, said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi.
China, one of the biggest consumers of US cotton, reported 20,261 new coronavirus cases for April 24, China’s National Health Commission said, while mass COVID-19 testing of all residents in Beijing began on Monday, prompting fears of a Shanghai-style lockdown after dozens of cases in the capital in recent days.
The US dollar rose to its highest since March 2020, making cotton more expensive for overseas buyers. Additionally, oil slipped and headed to its lowest in nearly two weeks on lower growth prospects. Lower oil prices make polyester, a substitute for cotton, less expensive.
“(The weather) is very supportive for the situation in West Texas, and at some point the market will start looking at that. But right now the market’s not paying attention to West Texas,” Varner added. In wider grains markets, soybean oil prices turned lower while soybean and corn prices also fell.
The US Department of Agriculture (USDA) has forecast cotton production in Bangladesh for marketing year (MY) 2022-23 to be 155,000 bales—up by 2.6 per cent over MY 2021-22—and imports at 8.9 million bales. Cotton harvested area is projected at 46,000 hectares for this MY, up by 2.2 per cent over MY 2021-2022. Indian cotton took 29 per cent market share in 2021, followed by Brazil, Benin and the United States.
In 2021, Bangladesh’s readymade garment exports reached a record high of $35.81 billion, and the country became the second largest exporter after China. Due to high domestic demand for yarn and fabric, Bangladesh continues to import these products in substantial amounts.
Harvested area in the country is increasing due to support from the ministry of agriculture’s Cotton Development Board (CDB) extension service and comparatively higher economic returns, USDA noted. USDA estimates the MY 2021-22 cotton harvested area and production at 45,000 hectares and 151,000 bales respectively.
Domestically-produced cotton accounts for less than 2 per cent of total cotton consumption in the country. Total cotton cultivation in Bangladesh covers only 0.55 per cent of the country’s 8.1 million hectares of arable land.
In cotton year (CY) 2021, Bangladesh’s readymade garment (RMG) exports hit a record high of $35.81 billion. Knitwear products exports were $19.6 billion and woven products were $16.21 billion, up by 37.72 per cent and 22.45 per cent respectively compared to CY 2020.
In CY 2021, Bangladesh became the second largest global RMG exporter after China. The COVID-19 pandemic adversely affected Bangladesh’s RMG exports in CY 2020, with the country falling behind Vietnam. Total RMG exports were $27.45 billion, down by nearly 17 per cent from the previous year; however, Bangladesh’s RMG factories began to see increased orders from Europe and the United States in the second quarter of 2021 as their economies recovered.
Bangladesh imports large quantities of fabric and also exports limited quantities. The value of Bangladesh’s fabric exports under HS codes 5208 and 5209 in CY 2021 was $27.83 million, 40.6 per cent lower than the previous year.
Total fabric imports in CY 2021 also dropped to $1.8 billion from $2.6 billion in CY 2020, as Bangladesh imported more yarn.
Cotton consumption continues to increase for MY 2022-23. USDA forecasts that the total domestic raw cotton consumption at 9.31 million bales, up by 5.6 per cent over the MY 2021-22 USDA official estimate.
Post estimates MY 2021-22 domestic raw cotton consumption at 9 million bales, which is 2.27 per cent higher than USDA official estimate.
USDA forecasts MY 2022-23 yarn and fabric consumption at 0.96 million MT and 6.4 billion metres respectively. For MY 2021-22, it estimates yarn and fabric consumption at 0.95 million MT and 6.3 billion metres respectively.
Bangladesh’s cotton imports continue to increase steadily. USDA forecasts MY 2022-23 cotton imports at 8.9 million bales, up by 7.2 per cent over the MY 2021-22 USDA official estimate, assuming increasing yarn and fabric demand by the RMG industry. The Spot Rate remained unchanged at Rs 20,500 per maund. Polyester Fiber was available at Rs 290 per kg.
Copyright Business Recorder, 2022