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Overview of the global cotton market as of 04.02.2023

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Market conditions. Brazil. Brazilian cotton sales resumed in January 2023 and showed a gradual increase. As observed in 2022, agents have reported difficulty matching prices and product quality, impacting liquidity in the spot market. In this scenario, the CEPEA/ESALQ index for cotton remained at around BRL 5.3 per pound in January. On the demand side, traders continued to prioritize contract execution. Some buyers were looking for higher quality cotton, and some were willing to pay higher prices to meet special requirements. It is important to highlight that processors’ agents have reported low demand throughout the textile chain, arguing that they are finding it difficult to translate higher cotton prices into finished products, resulting in reduced purchases, according to the Center for Advanced Study in Applied Economics (CEPEA) in San Paulo, in the latest bi-weekly report on the Brazilian cotton market. Cotton farmers were unwilling to lower asking prices, mostly those with cash flow. Sellers were willing to cut prices only for lower quality cotton. Some of them decided to wait for better deals with better quality cotton.

Between December 29 and January 31, the CEPEA/ESALQ index for cotton rose by 0.14% to BRL 5.2561 per pound. The January average of BRL 5.3362 per pound was 0.3% higher than December 2022 but 23.9% lower than January 2022 in real terms. However, domestic prices in January were on average 17.7% above the export parity. Early deals for the 2021-2022 harvest – for delivery in the coming months – were closed at the end of January. On the export side, agents used ICE Futures contract pricing to lock in prices. Sales of the current and two upcoming crops were recorded. By January 26, 57.31% of the 2022-23 cotton crop had been sown in Brazil, according to ABRAPA, the Brazilian Cotton Growers Association.

Data released Jan. 27 by the Cotton Outlook shows a 0.14% decline in global cotton production in the 2022-2023 season to 24.862 million tonnes, down 0.7% from the previous crop. For Brazil, production in 2022-23 is estimated to be 13.5% higher than the previous season, but the data has been revised down by 0.9% from the December 2022 forecast.

USA. On Feb. 2, the USDA released its weekly US cotton export sales report for Jan. 20-26. According to the ministry, during this period, cotton export contracts amounted to 36,700 tons, which is 20% less than last week, but 28% higher than the average of the last 4 weeks. The biggest buyers of American cotton were China (25,670 tons), Turkey (9,430 tons) and Indonesia (1,885 tons).

US cotton export figures for the week (tonnes)

At the same time, US cotton shipments for this period amounted to 45,470 tons, which is 21% more than last week and 41% higher than the average of the last 4 weeks. American cotton during this period was mainly shipped to such countries as China (12,680 tons), Pakistan (9,700 tons), Turkey (5,230 tons), Vietnam (4,370 tons) and Mexico (3,860 tons).

Turkey. Turkey’s clothing exports increased by 6.46% year-on-year in January-December 2022, according to the Turkish Statistical Institute and the country’s Ministry of Commerce. During the year, Turkey exported $19.475 billion worth of apparel, compared to exports of $18.294 billion in 2021. Exports fell 9.2% year on year to $0.890 billion in December 2022.

By category, exports of knitted and crocheted apparel and accessories (HS chapter 61) earned $11.011 billion in January-December 2022, up 2.1% from the $10.780 billion earned in the same months of the previous year . Exports of non-knitted apparel and accessories (HS chapter 62) are valued at $8.464 billion, an increase of 12.7% compared to exports of $7.513 billion in January-December 2021.

Meanwhile, Turkey’s imports of cotton, cotton yarn and cotton fabrics (HS chapter 52) increased by 30.3% to $4.842 billion from $3.714 billion in 2021.

In December 2022, the latest month for which data is available, Turkey’s exports of knitted and crocheted apparel and accessories (HS Chapter 61) were hit by the global economic slowdown and weak demand. Non-knit apparel and accessories shipments (HS chapter 62) also showed negative growth of 4% in the same month. In 2021, Turkey’s total exports of knitted and crocheted apparel and accessories (HS chapter 61) and non-knitted apparel and accessories (HS chapter 62) were estimated at $18.294 billion.

Price conjuncture. Last week the global cotton markets saw price fluctuations in a narrow range. Despite the foundation

tal growth factors, speculative trades, as well as the decision of the FRS played a role in the reduction of quotations. The Federal Reserve System (FRS) raised the interest rate on federal credit funds (federal funds rate) by 25 basis points, now its range is 4.5-4.75% per annum, the Federal Open Market Committee (FOMC) said in a statement. following the meeting.

Dynamics of changes in cotton prices on the world market (c/f).

In general, compared with last Friday’s quotes, March cotton futures quotes on the New York ICE Exchange fell by 1.46 c/f to 85.43 c/f. In the physical market, Cotlook Index A fell by 10.65 c/f to 101.75 c/f compared to the previous week.

Forecast. In anticipation of the transition of futures contracts from March to May, it is expected that participants in the trading floors will begin to take profits and massively sell off assets, which may lead to lower prices. Based on the above, a further drop in prices is expected. But it should be noted that there are many factors that determine further price behavior, such as weather conditions, prices for other commodities, policies in a number of key producing countries, stability in consumer countries such as Southeast Asia, and much more.